Promoting Sustainable Tax Compliance in the Informal Sector in Nigeria

Abstract

This study aimed at investigating the causes of low level of tax compliance in the informal sector in Nigeria and the effect of such, on economic growth and development, with a view to designing appropriate strategies for promoting sustainability of tax compliance in the sector. To achieve this goal, some research questions were raised, hypotheses were formulated and criticalreview of related literature was made. The population for this study comprises both tax officials and business owner managers in the south-east region of Nigeria. To gather the primary data for the study, a set of questionnaire was administered on 200 business owner managers and 115 tax officials. The secondary data were sourced from the Central Bank of Nigeria (CBN) statistical bulletin for a time period of 20 years (i.e 1990-2009). The Pearson Product-Moment Co-efficient of Correlation was the statistical technique employed in testing the stated hypotheses. Our findings revealed several causes of tax compliance problem in the informal sector in Nigeria. Among which are high tax, rate, inadequate provision of public goods and services, lack of transparency and accountability of public funds, poor funding of tax boards, absence of functional tax audit, lack of reciprocity and legitimacy, ineffective deterrence measures, out-dated tax laws, lack of public trust, and corrupt practices of tax officials. Based on the above, it was concluded that the Nigerian government should put the necessary machinery in place to ensure tax compliance in the informal sector by giving adequate attention to the recommendations made in this study.