The Effect of Simplified Tax Systems on Compliance in the Informal Sector: A Case Study of Abuja's Wuse Market
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Background of the Study
The informal sector in Nigeria is characterized by a lack of formal record-keeping and limited interaction with regulatory systems, making tax compliance a daunting task. Simplified tax systems have emerged as a potential solution to these challenges, aiming to reduce complexity, improve understanding, and encourage voluntary compliance (Adebayo & Ogundele, 2024).
In Abuja's Wuse Market, a bustling center of informal economic activity, simplified tax systems have been introduced to address the low compliance rates. These systems often involve flat-rate taxes, presumptive taxes, or streamlined registration processes. While these initiatives show promise, their effectiveness in enhancing compliance remains a subject of debate (Eze & Anayo, 2023).
This study investigates the impact of simplified tax systems on compliance in Wuse Market, examining their design, implementation, and outcomes.
Statement of the Problem
The complexity of Nigeria's tax system has been a significant barrier to compliance in the informal sector. In Wuse Market, many informal business owners perceive the tax system as burdensome and inaccessible, leading to widespread evasion. Simplified tax systems have been introduced as a solution, but their effectiveness in improving compliance has not been fully evaluated (Okonkwo & Balogun, 2024).
This study assesses the effect of simplified tax systems on compliance in Wuse Market, identifying factors that influence their success and limitations.
Objectives of the Study
- To examine the design and implementation of simplified tax systems in Wuse Market.
- To evaluate the impact of these systems on compliance in the informal sector.
- To recommend strategies for enhancing the effectiveness of simplified tax systems.
Research Questions
- How are simplified tax systems designed and implemented in Wuse Market?
- What impact do simplified tax systems have on compliance in the informal sector?
- What strategies can improve the effectiveness of simplified tax systems in Wuse Market?
Research Hypotheses
- Simplified tax systems are effectively designed and implemented in Wuse Market.
- Simplified tax systems positively influence compliance in the informal sector.
- Enhancing simplified tax systems improves compliance rates among informal businesses.
Scope and Limitations of the Study
The study focuses on the impact of simplified tax systems on compliance among informal businesses in Wuse Market between 2023 and 2025. Limitations include potential biases in self-reported compliance data and the difficulty of isolating the impact of simplified tax systems from other influencing factors.
Definitions of Terms
- Simplified Tax Systems: Taxation frameworks designed to reduce complexity and administrative burdens for taxpayers.
- Compliance: Adherence to tax obligations, including accurate filing and payment.
- Wuse Market: A prominent market in Abuja, Nigeria, dominated by informal businesses.
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