The Impact of Perceived Fairness in the Tax System on Compliance: A Case Study of Small-Scale Businesses in Enugu State
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Background of the Study
Perceived fairness in the tax system is a critical determinant of tax compliance. When taxpayers believe that the tax system is equitable, transparent, and just, they are more likely to comply willingly. In Nigeria, however, issues such as corruption, lack of accountability, and disproportionate tax burdens contribute to perceptions of unfairness, particularly among small-scale businesses (Nwankwo & Ebere, 2024).
Enugu State, with its vibrant small-scale business sector, reflects these challenges. Business owners often express dissatisfaction with the tax system, citing issues such as multiple taxation and inadequate public services. This study investigates how perceived fairness in the tax system impacts compliance among small-scale businesses in Enugu State, with a view to identifying strategies for fostering trust and voluntary compliance (Okafor & Uchenna, 2023).
Statement of the Problem
Tax compliance among small-scale businesses in Enugu State remains low, partly due to perceptions of unfairness in the tax system. Many business owners believe that taxes are arbitrarily imposed, inequitably distributed, and poorly utilized, leading to widespread non-compliance (Chukwu & Anya, 2023).
This study examines the relationship between perceived fairness in the tax system and compliance, aiming to provide insights into how improving fairness perceptions can enhance voluntary compliance.
Objectives of the Study
- To assess the level of perceived fairness in the tax system among small-scale businesses in Enugu State.
- To evaluate the impact of perceived fairness on tax compliance.
- To propose measures for improving perceptions of fairness to enhance compliance.
Research Questions
- What is the level of perceived fairness in the tax system among small-scale businesses in Enugu State?
- How does perceived fairness influence tax compliance?
- What measures can improve perceptions of fairness to enhance compliance?
Research Hypotheses
- Perceived fairness in the tax system is low among small-scale businesses in Enugu State.
- Perceived fairness positively influences tax compliance among small-scale businesses.
- Improving perceptions of fairness significantly enhances tax compliance.
Scope and Limitations of the Study
The study focuses on small-scale businesses in Enugu State from 2023 to 2025, examining the relationship between perceived fairness and compliance. Limitations include potential bias in subjective perceptions and the difficulty of isolating fairness perceptions from other compliance factors.
Definitions of Terms
- Perceived Fairness: Taxpayers’ subjective assessment of the equity and justice of the tax system.
- Tax Compliance: The act of fulfilling tax obligations as required by law.
- Small-Scale Businesses: Enterprises with limited capital, workforce, and market reach.
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