The Effect of Public Perception of Taxes on Evasion Rates in Nigeria: A Study of SMEs in Kano State
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Background of the Study
Public perception of taxes plays a critical role in determining tax compliance levels, particularly among small and medium enterprises (SMEs). In Nigeria, where SMEs contribute significantly to employment and GDP, tax evasion remains a pressing issue, partly driven by negative perceptions of the tax system. Factors influencing these perceptions include lack of transparency, perceived corruption, and the perceived burden of taxes relative to the benefits received (Yusuf & Abubakar, 2023).
In Kano State, a hub for commerce and industry, the relationship between tax perception and compliance among SMEs is particularly relevant. Understanding how attitudes toward taxation influence evasion behavior is essential for developing policies that enhance compliance and revenue generation (Ibrahim & Hassan, 2024).
Statement of the Problem
Tax evasion among SMEs in Nigeria, including Kano State, continues to undermine the country’s revenue potential. Negative perceptions of taxes, such as views of corruption, inefficiency in public spending, and lack of accountability, contribute significantly to non-compliance (Abdullahi & Musa, 2024).
Despite efforts to improve tax administration and communication, public distrust in the tax system persists. This study seeks to evaluate how public perception influences tax evasion rates among SMEs in Kano State and to recommend strategies for improving compliance.
Objectives of the Study
- To assess the relationship between public perception of taxes and evasion rates among SMEs in Kano State.
- To identify factors shaping public perception of taxes in Kano State.
- To recommend strategies for improving tax compliance by addressing public perception issues.
Research Questions
- How does public perception of taxes influence evasion rates among SMEs in Kano State?
- What factors shape public perception of taxes in Kano State?
- What strategies can improve tax compliance by addressing public perception issues?
Research Hypotheses
- H₀: Public perception of taxes does not significantly influence evasion rates among SMEs in Kano State.
- H₀: Factors shaping public perception of taxes do not significantly impact compliance behavior.
- H₀: Proposed strategies will not significantly improve tax compliance by addressing perception issues.
Scope and Limitations of the Study
The study focuses on SMEs in Kano State, examining the relationship between public perception of taxes and evasion rates from 2020 to 2025. Limitations include potential biases in self-reported data and the influence of broader economic factors on compliance behavior.
Definitions of Terms
- Public Perception: The collective attitudes and beliefs held by individuals about a particular subject.
- Tax Evasion: The illegal act of avoiding tax payment.
- SMEs: Small and medium enterprises, often defined by their size, revenue, and number of employees.
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