A Critical Analysis of Corporate Tax Compliance and Its Effect on Business Performance in Kaduna State
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Background of the Study
Corporate tax compliance is a vital aspect of business operations, as it ensures that companies contribute to government revenue and uphold their legal obligations. In developing economies like Nigeria, tax compliance is crucial for ensuring that businesses meet their financial responsibilities and maintain a sustainable operating environment (Bello et al., 2023). In Kaduna State, businesses play a significant role in the state's economy, with various sectors such as agriculture, manufacturing, and trade contributing to employment and economic development (Ezekiel & Akinmoladun, 2024). However, corporate tax compliance in Nigeria has long been a challenge due to factors such as poor awareness of tax regulations, corruption, and a lack of effective enforcement mechanisms (Olaniyan & Dada, 2025).
The Nigerian tax system is characterized by a complex structure of taxes, including value-added tax (VAT), income tax, and corporate tax. The federal government, alongside state tax authorities, is responsible for regulating and ensuring compliance with these taxes. However, there are discrepancies in the effectiveness of tax collection and enforcement across different regions, leading to varying levels of corporate tax compliance (Ahmed & Ibidapo, 2023). In Kaduna State, businesses, particularly in the informal sector, have often been accused of evading taxes, which significantly impacts government revenue and the provision of public goods.
Corporate tax compliance not only affects the government’s revenue but also has profound implications for business performance. Firms that comply with tax regulations can benefit from enhanced credibility, access to government incentives, and a more conducive business environment (Ajibade & Adeosun, 2024). On the other hand, tax evasion or avoidance can result in penalties, loss of goodwill, and legal challenges, which can harm a business’s reputation and financial standing. Despite the growing recognition of the importance of tax compliance, empirical studies examining its direct effect on business performance in Kaduna State remain scarce (Kari & Adebayo, 2023).
This study seeks to critically analyze the relationship between corporate tax compliance and business performance in Kaduna State, providing valuable insights into how businesses can improve compliance and enhance their overall performance.
Statement of the Problem
Corporate tax compliance remains a persistent issue in many parts of Nigeria, including Kaduna State. A significant number of businesses in the state engage in tax evasion, citing reasons such as poor tax education, inefficient tax administration, and high tax rates (Abdulkadir et al., 2024). These issues hinder the ability of the government to collect sufficient revenue, affecting public service delivery and economic development. Furthermore, businesses that fail to comply with tax regulations are often subjected to penalties, which negatively impact their financial performance and growth potential (Olumide & Anifowose, 2025). However, the relationship between tax compliance and business performance in Kaduna State remains underexplored.
The lack of clear empirical evidence on the effects of corporate tax compliance on business performance in the region makes it difficult for policymakers and businesses to understand the full scope of the issue. The problem is compounded by a lack of effective tax administration systems and limited awareness among business owners about the benefits of tax compliance. Therefore, it is essential to investigate how corporate tax compliance affects business performance in Kaduna State, to identify the barriers that businesses face and to recommend strategies for improving compliance.
Objectives of the Study
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To assess the level of corporate tax compliance among businesses in Kaduna State.
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To examine the impact of corporate tax compliance on the financial performance of businesses in Kaduna State.
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To explore the barriers to corporate tax compliance and recommend strategies to improve compliance among businesses.
Research Questions
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What is the level of corporate tax compliance among businesses in Kaduna State?
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How does corporate tax compliance impact the financial performance of businesses in Kaduna State?
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What are the barriers to corporate tax compliance in Kaduna State, and how can they be addressed?
Research Hypotheses
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There is a positive relationship between corporate tax compliance and the financial performance of businesses in Kaduna State.
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The level of awareness of tax regulations significantly influences the rate of corporate tax compliance among businesses in Kaduna State.
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Barriers such as poor tax education and high tax rates negatively affect corporate tax compliance in Kaduna State.
Scope and Limitations of the Study
This study will focus on businesses operating in Kaduna State, specifically those in the formal sector. It will assess corporate tax compliance and its impact on financial performance within the state’s economic context. Limitations include the difficulty of accessing confidential financial data from businesses, as well as potential biases in self-reported tax compliance. The study will also exclude businesses in the informal sector, which may limit the generalizability of the findings.
Definitions of Terms
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Corporate Tax Compliance: The process of businesses adhering to tax regulations, including the timely filing of returns and payment of taxes owed to the government.
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Tax Evasion: The illegal act of deliberately avoiding paying taxes by underreporting income or inflating deductions.
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Business Performance: A measure of a company’s financial health and operational success, often indicated by profitability, revenue growth, and return on investment.
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