An Evaluation of Tax Compliance Levels Among Nigerian SMEs: A Case Study of Abuja Municipal Area Council
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Background of the Study
Tax compliance refers to the extent to which taxpayers adhere to tax laws and regulations. For SMEs in the Abuja Municipal Area Council (AMAC), tax compliance is essential for maintaining legitimacy and avoiding penalties. However, compliance levels among SMEs in AMAC remain low due to a lack of awareness, complicated tax processes, and mistrust in the use of tax revenues (Abubakar & Umar, 2024).
Non-compliance not only deprives the government of revenue but also exposes SMEs to legal and financial risks. Factors influencing compliance levels include tax knowledge, perception of fairness, and the efficiency of the tax collection system. Studies suggest that simplifying tax processes and increasing transparency can significantly improve compliance rates (Eze & Adewale, 2023).
Statement of the Problem
Despite the importance of tax compliance, SMEs in AMAC continue to exhibit low compliance levels. Challenges such as inadequate tax education, poor administration, and distrust in government use of taxes exacerbate the problem. While broader studies on tax compliance exist, specific insights into the challenges faced by SMEs in AMAC remain scarce.
Objectives of the Study
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To assess the current tax compliance levels among SMEs in AMAC.
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To identify factors affecting tax compliance among SMEs.
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To propose strategies for improving tax compliance in AMAC.
Research Questions
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What are the current tax compliance levels among SMEs in AMAC?
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What factors influence tax compliance among SMEs in AMAC?
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What strategies can enhance tax compliance in AMAC?
Research Hypotheses
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H₀: Tax knowledge does not significantly influence compliance levels among SMEs in AMAC.
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H₀: Perception of tax fairness does not significantly affect compliance levels.
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H₀: Simplifying tax processes does not significantly improve compliance rates.
Scope and Limitations of the Study
This study focuses on SMEs within the Abuja Municipal Area Council, exploring their compliance levels and influencing factors. The study excludes large enterprises and SMEs outside AMAC. Limitations include the potential difficulty in obtaining accurate self-reported compliance data.
Definitions of Terms
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Tax Compliance: The adherence of taxpayers to tax laws and regulations.
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AMAC: Abuja Municipal Area Council, a key administrative region in Nigeria's capital.
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Perception of Tax Fairness: Taxpayers' view of whether the tax system is equitable and just.
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