Background of the Study
Corporate governance has emerged as a crucial factor in driving organizational accountability and transparency. For small and medium-sized enterprises (SMEs), effective governance practices are essential in ensuring compliance with statutory obligations, including corporate tax compliance. In Nigeria, SMEs account for a significant portion of economic activity, yet tax evasion and non-compliance remain pervasive, threatening revenue generation and national development (Abiola & Adebayo, 2024). Poor governance structures, lack of financial transparency, and inadequate understanding of tax laws contribute to the persistent non-compliance among SMEs.
In Gombe State, where local businesses contribute significantly to the economy, the relationship between corporate governance and tax compliance warrants a closer examination. While regulatory frameworks aim to encourage compliance, the effectiveness of governance practices in achieving this remains underexplored (Olaniyan et al., 2025). This study investigates how governance mechanisms influence tax compliance in SMEs, providing recommendations for fostering a culture of accountability and compliance in the sector.
Statement of the Problem
Despite the critical role of SMEs in Nigeria’s economic development, tax compliance within this sector remains alarmingly low. Weak corporate governance structures are a major contributor to this issue, as SMEs often lack proper oversight and internal controls (Chinwe & Musa, 2023). This has led to significant revenue losses for the government and created an uneven playing field for businesses that adhere to tax regulations.
Existing literature has largely focused on the role of government policies in improving tax compliance, with limited attention to the internal governance mechanisms of SMEs. This study seeks to fill this gap by exploring the relationship between corporate governance and tax compliance in local businesses in Gombe State, highlighting the practical steps necessary to address this pervasive challenge.
Objectives of the Study
To examine the influence of corporate governance practices on tax compliance among SMEs in Gombe State.
To identify key governance factors that promote or hinder tax compliance in SMEs.
To propose strategies for improving tax compliance through enhanced corporate governance practices.
Research Questions
How do corporate governance practices influence tax compliance among SMEs in Gombe State?
What governance factors promote or hinder tax compliance in SMEs?
What strategies can improve tax compliance through better corporate governance practices?
Research Hypotheses
Corporate governance practices do not significantly influence tax compliance among SMEs in Gombe State.
Governance factors do not significantly promote or hinder tax compliance in SMEs.
Strategies to improve corporate governance practices do not significantly enhance tax compliance in SMEs.
Scope and Limitations of the Study
This study focuses on local SMEs operating in Gombe State, examining their corporate governance practices and tax compliance behavior between 2018 and 2025. Limitations include potential reluctance of SMEs to share sensitive financial data and the study’s regional focus, which may not fully capture broader national trends.
Definitions of Terms
Corporate Governance: The systems, principles, and processes used to direct and manage a business.
Tax Compliance: The degree to which a business adheres to tax laws and regulations.
SMEs: Small and medium-sized enterprises, typically characterized by limited revenue and workforce size.
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