An Examination of the Psychological Determinants of Tax Compliance in Nigeria: A Study of SMEs in Kaduna State

An Examination of the Psychological Determinants of Tax Compliance in Nigeria: A Study of SMEs in Kaduna State

Background of the Study

Tax compliance is essential for sustainable government revenue and effective public service delivery. However, compliance among Small and Medium Enterprises (SMEs) in Nigeria remains inconsistent, with many businesses evading taxes despite awareness campaigns and enforcement mechanisms. Psychological factors such as trust in government, perceived fairness of the tax system, and social norms significantly influence compliance behaviors.

Kaduna State, with its vibrant SME sector, contributes to Nigeria's economic growth but suffers from tax compliance challenges. Previous studies have shown that taxpayers' attitudes, moral obligations, and perceived risks of non-compliance are critical determinants of compliance (Adedeji & Oluwaseun, 2024). This study examines how these psychological factors influence tax compliance among SMEs in Kaduna State, providing insights for improved policy interventions.

Statement of the Problem

Despite government efforts to improve tax compliance, SMEs in Kaduna State exhibit a low compliance rate, undermining the state’s revenue generation capacity. Traditional enforcement measures have yielded limited success, prompting the need to explore psychological determinants. Factors such as distrust in government, perception of tax inequity, and lack of societal pressure contribute to the persistent issue of non-compliance (Eze & Musa, 2023).

This study investigates the psychological determinants influencing tax compliance in Kaduna State, offering recommendations to bridge the gap between policy and practice.

Objectives of the Study

1. To identify the psychological factors influencing tax compliance among SMEs in Kaduna State.
2. To analyze the relationship between trust in government and tax compliance.
3. To propose strategies for leveraging psychological insights to enhance tax compliance.

Research Questions

1. What psychological factors influence tax compliance among SMEs in Kaduna State?
2. How does trust in government affect tax compliance behaviors?
3. What strategies can be implemented to improve tax compliance based on psychological insights?

Research Hypotheses

1. H₀: Psychological factors do not significantly influence tax compliance among SMEs in Kaduna State.
2. H₀: Trust in government has no significant relationship with tax compliance.
3. H₀: Psychological strategies do not significantly improve tax compliance.

Scope and Limitations of the Study

The study focuses on SMEs operating in Kaduna State, analyzing psychological determinants of tax compliance between 2020 and 2025. Limitations include self-reported biases in survey responses and regional variations in compliance factors.

Definitions of Terms

• Tax Compliance: Adherence to tax laws and timely payment of tax obligations.
• Psychological Determinants: Factors such as trust, fairness, and social norms influencing behavior.
• SMEs: Small and Medium Enterprises, defined by their size and economic contribution.

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