Background of the Study
Small traders form the backbone of informal economies in many developing countries, including Nigeria. Their contributions to local economies are significant, yet their tax compliance rates often lag behind larger businesses. Tax morale, the intrinsic willingness to pay taxes, plays a critical role in shaping compliance behavior among these traders.
In Anka Local Government Area (LGA), small traders face numerous challenges, including lack of awareness about tax policies, perceived inequities in the tax system, and limited trust in the government’s use of tax revenues. These factors often lead to resistance or outright evasion. However, the motivations and attitudes of small traders regarding tax compliance remain underexplored, making it difficult to design effective interventions.
By examining the tax morale of small traders in Anka LGA, this study aims to uncover the psychological and contextual factors influencing their compliance behavior. Insights from this research will inform policies to foster a culture of voluntary compliance, ultimately enhancing local revenue generation.
Statement of the Problem
Despite the economic significance of small traders in Anka LGA, their tax compliance rates remain low, posing challenges to revenue mobilization. Existing tax policies often overlook the unique circumstances of small traders, resulting in mistrust and non-compliance. Understanding the tax morale of this group is crucial for designing effective strategies to improve compliance.
Aim and Objectives of the Study
Aim: To analyze the factors influencing tax morale among small traders in Anka LGA.
Objectives:
To assess the level of tax awareness among small traders in Anka LGA.
To evaluate the impact of trust in government on tax morale.
To examine how perceived fairness of the tax system affects compliance behavior.
Research Questions
What is the level of tax awareness among small traders in Anka LGA?
How does trust in government influence tax morale among small traders?
What role does perceived fairness of the tax system play in shaping compliance behavior?
Research Hypothesis
H₀: There is no significant relationship between tax awareness and tax morale among small traders in Anka LGA.
H₀: Trust in government does not significantly affect tax morale.
H₀: Perceived fairness of the tax system has no significant impact on tax compliance behavior.
Significance of the Study
This study will help tax authorities better understand the unique challenges faced by small traders, enabling the formulation of inclusive and fair tax policies. It also contributes to academic discourse by exploring tax morale in informal sectors.
Scope and Limitation of the Study
The study focuses on registered and informal small traders in Anka LGA. Limitations include potential respondent bias and difficulty in accessing unregistered traders.
Definition of Terms
Small Traders: Individuals or businesses engaged in small-scale trading activities.
Tax Awareness: The understanding of tax policies and obligations.
Tax Compliance: The act of fulfilling tax obligations.
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