The Impact of Tax Morale on Compliance Behavior in Nigeria: A Case Study of Lagos-Based Businesses
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Background of the Study
Tax morale refers to the intrinsic motivation of individuals and businesses to pay taxes, shaped by their perceptions of fairness, trust in government, and social norms. High tax morale is associated with greater voluntary compliance, while low morale often leads to tax evasion or avoidance. In Nigeria, tax compliance remains a pressing challenge, particularly among businesses in Lagos, the nation’s commercial hub. Despite Lagos State generating the highest Internally Generated Revenue (IGR) in the country, non-compliance remains prevalent among businesses (Adefemi & Oluwaseun, 2023).
Factors affecting tax morale in Lagos include perceived corruption, inefficient public service delivery, and complex tax administration. Research has shown that when taxpayers believe their taxes are being mismanaged or used ineffectively, their willingness to comply diminishes (Olowokere & Okon, 2024). Conversely, transparent governance, equitable tax policies, and consistent enforcement can enhance tax morale.
This study examines the relationship between tax morale and compliance behavior among Lagos-based businesses, focusing on how perceptions of the tax system and government accountability influence compliance decisions.
Statement of the Problem
Lagos State, being a key economic hub, relies heavily on tax revenue to fund infrastructure, education, and public services. However, a significant portion of its tax potential remains untapped due to low compliance rates. The issue is compounded by low tax morale, driven by taxpayers’ distrust in government institutions and dissatisfaction with public service delivery. Many businesses perceive the tax system as unfair and burdensome, further eroding their motivation to comply voluntarily (Adekunle et al., 2023).
This study addresses the critical issue of low tax morale and its impact on compliance behavior among Lagos-based businesses. It seeks to identify the underlying causes and propose strategies for improving morale to enhance compliance.
Objectives of the Study
- To assess the relationship between tax morale and compliance behavior among Lagos-based businesses.
- To identify factors influencing tax morale in Lagos State.
- To propose strategies for improving tax morale and compliance rates among Lagos-based businesses.
Research Questions
- What is the relationship between tax morale and compliance behavior among Lagos-based businesses?
- What factors influence tax morale in Lagos State?
- What strategies can improve tax morale and compliance rates among Lagos-based businesses?
Research Hypotheses
- Tax morale has a significant positive impact on compliance behavior among Lagos-based businesses.
- Factors such as trust in government and perceived fairness significantly influence tax morale in Lagos State.
- Improved tax morale significantly enhances compliance rates among Lagos-based businesses.
Scope and Limitations of the Study
The study focuses on businesses operating in Lagos State, examining tax morale and compliance behavior from 2023 to 2025. Limitations include potential biases in self-reported data and challenges in generalizing findings to other regions in Nigeria.
Definitions of Terms
- Tax Morale: The intrinsic motivation to comply with tax obligations based on perceptions of fairness and trust.
- Tax Compliance: The adherence to tax laws through accurate reporting and payment of taxes.
- Lagos-Based Businesses: Enterprises operating within Lagos State, Nigeria.
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