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BENEFITS OF TAX COMPLIANCE TO SMALL
BUSINESS TAX PAYER
BY
OSAKUE PAUL
SSC0410958
A RESEARCH PROJECT SUBMITTED TO THEDEPARTMENT OF ACCOUNTING,
FACULTY OF MANAGEMENT SCIENCES,
UNIVERSITY OF BENIN
IN PARTIAL FULFILMENT OF THE REQUIREMENTFOR THE DEGREE OF BACHELOR OF SCIENCE
(B.Sc) IN ACCOUNTING
APRIL, 2011
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CERTIFICATION
This is to certify that this work was carried out by Osakue Paul in
the Department of Accounting, University of Benin in the 2008/2009
section.
__________________________
Engr. K. O. Ogiedu
Project Supervisor
__________________________
Prof. Izedonmi I. O.
Head of Department
ii
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DEDICATION
To God be the Glory, without much ado, I want to sincerely
dedicate this piece of my project work to God Almighty who made it
rosy for the fruition of this project work.
More so, I want to also dedicate this project work to my ever
beloved late brother, Mr. Osakue Osamudiamen Matthew, whose
gentle soul is resting in bossom of our almighty God, and my
parents, Mr. and Mrs. Stephen Osakue who are hale and healthy.
iii
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ACKNOWLEDGEMENT
I am sincerely grateful to God Almighty for making it possible
for me to get to this height of my educational pursuit, he saw me
through the difficult times during and after the fruition of this piece
of project work. Without mincing words, I have to acknowledge the
following people; firstly, I tremendously thank and appreciate the
tender, loving care of my indefatigable and industrious parent, Mr.
and Mrs. Stephen Osakue who financially contributed immensely to
see that my aims and objectives in the course of my education is a
success may their sources of income never go dry.
Secondly, my immense appreciation goes to my project
supervisor, Engr. K. O. Ogiedu whose contributions to my project
work and criticism made my work a huge success. Also my infinite
indebtedness goes to my fiance, Evelyn Ehiozuwa.
Finally, my infinite indebtedness also goes to my siblings; Mr.
Joseph Osakue, Mrs. Matina Ogbebor, Miss Josephine Osakue;
iv
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may the loving grace of God continue to bless you all. Also I want
to sincerely thank my creator (Messiah) for His abundant blessing
blessings showered on me and my family. Words alone cannot
express my infinite indebtedness to all my and sundry. May He
continue to see us through in all our endeavour in life (Amen).
v
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ABSTRACT
This project work examines the benefits in form of managerial, cashflow and deductible derived by small business entities as a result ofcomplying with their tax obligations in Nigeria. This adopted surveymethod and data were sourced using questionnaires. The primarydata were analysed using descriptive statistics tools in MicrosoftExcel and SPSS. The Hypotheses were tested using Chi-Squareand Correlation Co-efficient.
The study found small business taxpayers recognised that taxcompliance activities led to better record keeping as a requirement
imposed by tax compliance. This has in-turn compel smallbusinesses to upgrade their accounting systems, typically in theform of computerisation. The tax compliance activities of smallhave improved their record keeping, improved knowledge of theirfinancial affairs, improved internal and stock control, and inventoryand credit management.
vi
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LIST OF TABLES
Table 4.1: Distribution and Return of Questionnaire
Table 4.2: Sex Distribution of Respondents
Table 4.3: Age Distribution of Respondents
Table 4.4: Educational Qualification of Respondents
Table 4.5: Distribution of Business Type
Table 4.6: Distribution of registered business tax payers
Table 4.7: Tax Obligation
Table 4.8: Tax compliance and improvement of accounting
information system
Table 4.9: Tax compliance and improvement of internal control
Table 4.10: Benefits of tax compliance in terms of savings in cost
Table 4.11: Tax Compliance and business performance
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TABLE OF CONTENT
Title page .. .. .. .. .. .. .. .. i
Certification .. .. .. .. .. .. .. .. ii
Dedication .. .. .. .. .. .. .. .. iii
Acknowledgement .. .. .. .. .. .. .. iv-v
Abstract .. .. .. .. .. .. .. .. vi
List of Tables .. .. .. .. .. .. .. vii
Table of Content .. .. .. .. .. .. .. viii-x
CHAPTER ONE-INTRODUCTION
1.0 Background of Study .. .. .. .. .. 1
1.1 Statement of Research problem .. .. .. 3
1.2 Objectives of the Research .. .. .. .. 5
1.3 Statement of the Research Hypotheses .. .. 6
1.4 Scope of the Study .. .. .. .. .. 7
1.5 Significance of the Study .. .. .. .. .. 7
viii
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CHAPTER TWO-LITERATURE REVIEW
2.1 Introduction .. .. .. .. .. .. 9
2.2 Nigerian Tax System .. .. .. .. .. 12
2.3 Small Businesses .. .. .. .. .. 14
2.4 Tax Compliance Benefits to Small Businesses .. 19
CHAPTER THREE-RESEARCH METHODOLOGY
3.0 Introduction .. .. .. .. .. .. 29
3.1 Research Design .. .. .. .. .. .. 29
3.1.1 Population of the Study .. .. .. .. .. 30
3.1.2 Sample Size .. .. .. .. .. .. 30
3.2 Sources of Data .. .. .. .. .. .. 31
3.2.1 Primary Sources of Data .. .. .. .. 31
3.2.2 Secondary Sources of Data .. .. .. .. 32
3.3 Method of Data Analysis .. .. .. .. 32
3.4 Limitation of the Study .. .. .. .. .. 33
CHAPTER FOUR- PRESENTATION AND ANALYSIS OF DATA
4.0 Introduction .. .. .. .. .. .. 34
4.1 Presentation of Result .. .. .. .. .. 34
ix
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x
4.1.1 Demographic Information .. .. .. .. 35
4.1.2 Background Information .. .. .. .. .. 37
4.1.3 Research Question .. .. .. .. .. 40
4.2 Data Analysis .. .. .. .. .. .. 46
4.2.1 Test of Hypotheses .. .. .. .. 46
4.3 Research findings .. .. .. .. .. 54
CHAPTER FIVE-SUMMARY OF FINDING, CONCLUSION AND
RECOMMENDATIONS
5.0 Introduction .. .. .. .. .. .. 57
5.1 Findings and Discussion .. .. .. .. .. 57
5.2 Conclusion .. .. .. .. .. .. .. 60
5.3 Recommendations .. .. .. .. .. .. 60
5.4 Future Research .. .. .. .. .. .. 61
APPENDIX
Appendix 1: References .. .. .. .. .. .. 62
Appendix 2: Sample of Questionnaire .. .. .. .. 64
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CHAPTER ONE
INTRODUCTION
1.0 BACKGROUND OF STUDY
Small Businesses play an important role in economies of
any nation as they generate significant employment and output.
Evidence from the Asian Tigers attests to this fact that small
firms accounted for much of their growth; creating employment
and accelerating efficient utilization of capital. Apart from these
stated contributions, small businesses also contribute to the
wealth of any nation in their tax obligation and compliance. Tax
compliance is a global phenomenon that has been greatly
advocated for its enormous benefits to the government and the
taxpayers. Taxes are paid both by individuals and businesses.
Small business tax compliance is a function of the perceived
benefits outweighing the perceived costs.
The final Draft of Nigeria Tax Policy submitted to the
Federal Executive Council captured several definitions of the
concept of tax. Tax has been defined as a monetary charge
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imposed by the Government on persons, entities, transactions or
properties to yield revenue (National Tax Policy, final draft).
Taxes are therefore defined as a financial charge or levy
imposed upon an individual or legal entity by a State or a
component of the State (ibid). A tax is usually a monetary
charge on a persons or entitys income, property or transaction
and is usually collected by a defined authority at the Federal and
State Level. Taxes may be direct or indirect and may be
imposed on individual basis, on entities, on assets and on
transactional basis. In Nigeria, taxes are imposed on the
following: individuals; companies (Corporate Entities),
transactions and assets and obligation include registration in the
system; timely filing or lodgement of requisite taxation
information; reporting of complete and accurate information
(incorporating good record keeping); and payment of taxation
obligations on time. Meeting these obligation is referred to
obligation is termed tax compliance.
Allingham and Sandmo, (1972) tax compliance has been
understood in terms of the benefits of successful evasion
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weighed against the risk of detection and punishment. Tax
compliance is associated with cost and benefits to small
business, the former is a widely discuss subject in literatures
while the former is limited. Tax compliance induct a firm into the
formal sector, and allows the firm access to formal credit
markets, government procurement, and access to markets
including for export. Also tax compliance also provides Cash
flow benefits, managerial benefits and tax deductibility benefits
to small business. The main quantifiable form of tax compliance
benefit is the cash flow advantage which arises when
businesses have the use of tax revenues for a period before
they must be remitted to tax authorities (Sandford et al., 1989).
The thrust of this work is to evaluate the benefits of tax
compliance to small business tax payers in Nigeria.
1.1 STATEMENT OF RESEARCH PROBLEM
A number of studies have described small business
taxpayers as law abiding, responsible and ethical, taking their
tax obligations seriously (Brown, 1985; Cunningham and
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Lishercon, 1991). Nigeria economy is growing in the number of
small businesses as several incentives have been accorded
small scale industries to facilitate their development and growth.
For many small entrepreneurs in Africa in general and Nigeria in
particular, the choice to pay tax or remain in the informal sector
is a function of perceived benefits and costs. In the light of this
recognition, this study would examine the following questions:
i. What positive relationship exists between tax
compliance by an organization and improvement in
its accounting information system?
ii. What positive relationship exists between tax
compliance by an organization and improvement to
its internal controls?
iii. What positive relationship exists between tax
compliance by an organization and saving in costs?
iv. What positive relationship exists between tax
compliance by an organization and its business
performance via improved accounting information?
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1.2 OBJECTIVES OF THE RESEARCH
i. To determine positive relationship between tax
compliance by an organization and improvement in
its accounting information system;
ii. To determine the positive relationship between tax
compliance by an organization and improvement to
its internal controls;
iii. To ascertain whether there is positive relationship
between tax compliance by an organization and
saving in costs; and
iv. To determine positive relationship between tax
compliance by an organization and its business
performance via improved accounting information.
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1.3 STATEMENT OF RESEARCH HYPOTHESES
Hypotheses are tentative conjectural statement of the
relationship between two or more variable. They provide focus
for the study and give greater insight into understanding the
problems involved. For the purpose of this research work, the
following hypotheses will be tested:
H1: There is no positive relationship between tax compliance by
an organization and improvement in its accounting information
system.
H2: There is no positive relationship between tax compliance by
an organization and improvement to its internal controls.
H3: There is no positive relationship between tax compliance by
an organization and saving in costs.
H4: There is no positive relationship between tax compliance by
an organization and its business performance via improved
accounting information.
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1.4 SCOPE OF THE STUDY
This study is centred on benefits of tax compliance to
small business tax payers. These benefits are managerial
benefits, cash flow and deductibility benefits. The scope of study
is limited to taxpaying small businesses in Benin City using the
definition of National Council on Industries (1991) for micro-
scale, small-scale, and medium-scale enterprises.
1.5 SIGNIFICANCE OF THE STUDY
The importance and relevance of taxation in Nigeria is
numerous to mention. Taxes are sources of government
revenue expended for developmental projects. It also used in re-
distributing the wealth of the nation. This study will aid Nigerian
Revenue Authority in their tax design and administration
policies, and very helpful to the accounting practitioners. It will
also help educate large number of small business in embracing
formalization of their businesses; this will result in higher
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revenue to government and lower compliance cost of the
revenue authority. The study will also fill the existing knowledge
gap and increase the stock of literature for other researchers.
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throughout the world; great ancient civilizations such as Egypt,
Rome, Greece, Persia, Zulu, and Benin taxed their people to
achieve a collective greatness. In the Nigerian landscape,
taxation has been in existence even before the amalgamation of
Nigeria as a political entity in 1914. Several studies have stated
that the practice of taxation were rooted the traditional system of
the Yorubas, the Binis and the Hausas.
Taxation creates a balance between the various economic
classes by the redistribution of wealth and income thereby
raising generally the quality of life and increasing social
cohesion. The principles underlying taxation were enunciated by
Adam Smith as long ago as 1776 and till date his four cannons
of taxation; namely economic efficiency, equity, transparency
and certainty and administration remained valid.
Paul and Roland (1990) conceptualize some reasons for
taxation and they are summarized as follows:
i. Provision of Public goods: this type of good cannot be left
to the private market because of its immense benefit to
the general public. They stressed further th at public
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goods provides a non excludable benefit bthat is
available to everyone, regardless of who pays for it. Its
benefit is also inexhaustible; when one person enjoys it
the amount of benefit it provides to others is not
diminished. That is, the benefit derived by one person is
externalized, in that it becomes available to another
person at the same time (Umog, 1997).
ii. Encouraging the use of merit goods: Government
intervention may also be based on the view that people
are not in all cases the best judges of what is good for
them.
iii. Dealing with externalities
iv. Helping the poor. Due to market orientation and its
inclination towards the rich, taxes are collected to help the
impoverished and provide assistance for old people, the
handicapped and the needy.
v. Promoting economic stability: The general economic
stability in terms of increased and efficient production
system and employment index. In contributing to the pool
of knowledge, Eton (1998) stated that taxation is used to
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achieve the protection of home industries through
government varied instruments, fight inflation and
encourage healthy balance of payment of the country.
Other reason deduced for promoting economic stability
include: use of progressive tax and tax relief to encourage
investment.
For this study, the literature review is structured into the
following sub-themes: Nigerian tax laws and Tax Compliance
Benefits to small businesses
2.2 NIGERIAN TAX SYSTEMS
Blacks Law Dictionary defined tax as the enforced
proportional contributions from persons and property, levied by the
State by virtue of its sovereignty for the support of Government and
for all public needs. A country's tax system is a major
determinant of other macroeconomic indexes. It has also been
argued that the level of economic development has a very
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strong impact on a country's tax base (Hinricks, 1966;
Musgrave, 1969).
In Nigeria, taxes are imposed on individuals in form of Personal
Income Tax, Development Levy; on Companies in form of Companies
Income Tax, Petroleum Profits Tax, Education Tax and Technology
Tax; on Transactions in form of Value Added Tax, Capital Gains Tax,
Stamp Duty, Excise Duty, Import Duty and Export; and on Assets- this
includes taxes, such as property tax and other such taxes imposed on
land or landed property.
Personal Income Tax (PIT) was enacted in 1961. It governs the
taxation of individuals, and trustees, executors, partnership,
communities, and families. It has experienced a lot of amendments.
The current law guiding the taxation of personal incomes is the
Personal Income Tax Act (Cap P8 LFN 2004), (www.firs.gov.ng). PIT
is a tax that is imposed on individuals who are either in employment
or are running their own small businesses under a business name or
partnership. The employers of labor are deemed to be agents of the
tax authority for the purposes of remitting taxes deducted from
salaries due to employees.
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Value Added Tax (VAT) another type of tax paid by small
businesses was used to replace the sale tax decree of 1986-1988 is
managed by the federal Inland Revenue (FIR). Value Added Tax
(VAT) was introduced by decree number 102 of 1993 by the federal
military government of Nigeria. The value added tax decree took
effect form 1st January 1994 under decree at a flat rate of 5%, it is
levied on goods and services such as import, as well as professional
and banking services.
2.3 SMALL BUSINESS
There is no universally accepted definition of small
businesses comprising of Small and Medium Enterprises
(SMEs) across the globe. Definitions in each country reflect the
relative development of the prospective economies. According to
Holmes and Gibson (2001), a wide range of definitions of small
business are currently in use throughout government agencies
and among academics. These definitions involve a variety of
criteria based on the number of employees, turnover or net
assets.
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Beyene, (2002), in the USA, the small business
administration defines small business as any business with less
than 500 employees. In Nigeria, the definition of Small and
Medium Scale Enterprises has varied over the years across
various institutions. The National Council on Industrial Standards
in 1992, defined small and Medium Scale Enterprises (SMEs)
as enterprises with total cost (including working capital but
excluding cost of land) above 31 million but not exceeding
N150 million, with a labour size of between 11 and 100
employees. Small and Medium Industries Equity Investment
Scheme (SMIEIS) Revised Guidelines for Operation of the
Scheme defined a small and medium enterprise as any
enterprise with a maximum asset base of N500 million
(excluding land and working capital), and with no lower or upper
limit of staff.
Olorunshola, (2003), before 1992, different government
agencies in the Nigeria adopted different definitions for SMEs,
reflecting differences in the policy focus of the agencies. In
1992, the National Council on Industries streamlined these
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different definitions so as to remove confusion and ambiguities,
with a proviso that the official definition is subject to review
every four years. According to Udechukwu (2003), the 13th
meeting of the National Council on Industry, held in July 2003,
adopted the following definitions for micro-, small-, and medium-
scale enterprises:
Firm Type Labour Size Total CostexcludingWorkingCapital butincludingland cost
Total Costincludingworking capitalbut excludingland cost
micro/cottage Maximum of10 employees
is not more thanN1,500,000
small scaleindustry
Between 11and 100employees
N50 million
Mediumscale
labour sizeexceeds 100employeesbut is notmore than
300employees
Lies betweenN50 million andN200 million.
Central Bank of Nigerias (2004) defined Small and
Medium Scale Enterprises as any enterprises with a maximum
asset base of N200 million, excluding land and working capital,
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with the number of staff employed by the enterprise not less
than 10 and not exceeding 300.
According to World Bank (2004), there are various criteria of
size that might be used to define an SME (turnover, number of
employees, capital base, profits, extent of imports and export),
and various definitions have indeed been developed for
application in a range of countries. They defined small business
as follows:
Micro 10 or fewer employees, assets no more than
USD100,000
Small 10 to 50 employees, turnover and assets
between US$100, 000 and US$ 3 million
Medium 50 to 300 employees; turnover and assets
between US$3 to 15 million.
Across the globe, SMEs are regarded as economic
catalysts and the bedrock of all industrialized societies as they
feature prominently in economic transformation of any nation.
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They play a vital role in the mobilization of domestic product,
harnessing of local raw materials, employment generation, and
poverty reduction through sustainable livelihoods and
enhancement in personal income, technological development
and export diversification. In literature, it has been asserted that
small and medium scale enterprises contribute significantly to
improve living standards, local capital formation and high levels
of productivity and capability. Many economists also contend
that small firms offer a range of advantages over larger entities
because of their flexibility, their closeness to customers and their
important sub-contracting function (Scott 1991).
In recognition of the pivotal role of SME, several
governments have supported the growth of small business, and
the growth has been phenomenal. For example, while the
number of private SMEs recorded in China rose from zero in the
early 1980s to around 40 million now (Hall, 2007).
The increased focus on SMEs also reflects a growing emphasis
on their potentially critical role in fostering innovation,
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employment and growth, and also providing government
revenue in form of taxes.
2.4 TAX COMPLIANCE BENEFITS TO SMALL
BUSINESSES
A number of studies have described small business
taxpayers as law abiding, responsible and ethical, taking their
tax obligations seriously (Brown, 1985; Cunningham and
Lishercon, 1991). In Nigeria tax system, taxpayers obligations
were enumerated as follows:
i. Register for tax payment
ii. Determine the amount of tax payable
iii. Pay correctly and on time all taxes due or with held on
payments made including tax penalties:
iv. File a return in respect of taxes payable
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v. Keep and producer on demand all books of accounts
records, documents and return necessary for the
ascertainment of tax liability.
vi. Answer all queries and latent to notice or summons
served by the tax authorities.
vii. Co-operate with and allow tax officers full access to
premises, office or residence to search or remove
anything required for investigating tax chargeable or
bringing up a case in the law court.
viii. Give information of any other person or company
specified in a notice by the tax authorities.
ix. Pay to the tax authorities all or part of any amount of
money due to a company or person who has defaulted in
his tax obligation. If the tax authorities so direct.
x. Have a representative or tax officer designate to answer
all questions of tax payment (complains income tax).
xi. Do any other thing as may be required by the tax
authorities for a smooth administration of a tax policy.
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These tax obligations are also ascribed to business
enterprises, meeting them is simply referred to as tax
compliance. Tax compliance is the act or process of subjecting
oneself, ones incomes and business or expenditure to the
demands of the tax law. The original assumptions about tax
compliance were rooted in standard analyses of maximization of
expected income, taking into account the risks and penalties
associated with non-compliance (Allingham and Sandmo, 1972).
Roth et. al (1989) defined Tax compliance as compliance with
tax reporting requirements, namely that the taxpayer files all
required tax returns at the proper time and that the returns
accurately report tax liability in accordance with the tax laws,
regulations and court decisions applicable at the time the return
is filed. Manuwa (1996) defined tax compliance as the act or
process of subjecting oneself, ones income, business, asset or
expenditure to the demand of the tax law. Generally, tax
compliance means voluntary compliance of tax laws by
taxpayers without any effort or action by tax administration.
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The subject of tax compliance has been viewed with
feelings in the literatures, some researchers posited that tax
compliance is cost inclined and others argued that is rewarding
and beneficial. Sandford et. al (1989) asserted in their work that
the effect of complying with tax may not always be detrimental
as individuals who complete their tax return and file the
necessary information, may, at the same time, be encouraged to
engage in more efficient management of their financial affairs.
They further stressed that these benefits are likely to be more
significant in the case of businesses as compliance with the tax
system will force the business owner to introduce a more
efficient financial information system.
Benefits of tax compliance are in three folds as
documented in accounting literatures; they include managerial,
cash flow and Tax deductibility benefits. Sandford et. al (1989)
recognised cash flow benefits and managerial benefits as offsets
to compliance costs. Several studies on managerial benefits of
tax have been undertaken; prominent among them is the
Sandford VAT study that introduced concept of managerial
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benefits and attempted to quantify managerial benefits
(Sandford et. al, 1981). The term was coined due to the
attendant benefit and resultant financial management efficiency
due to businesses in complying with tax obligations. Managerial
benefits provide a basis for improved business or individual
decision making.
A cursory look at the obligations of taxpayers enumerated above
indicates information demand, and the required information is
only available through adequate record keeping by small
business. Lignier (2009) managerial benefits may be derived by
business taxpayers as a result of record keeping requirements
imposed by tax compliance obligations. In literature, it has been
asserted that record keeping result in improved information
system. Accounting information system is a computer-based
system that Nicoloau (2000) defines as a system that increases
the control and enhances the corporation inside the
organization. Boochholdt (1999) also defines accounting
information systems as systems that operate functions of data
gathering, processing, categorizing and reporting financial
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events with the aim of providing relevant information for the
purpose of score keeping, attention directing and decision-
making.
Evans, Carlon and Massey (2005) asserted that the
improved information system arises as a result of the necessity
to have a complete accounting system where all transactions
are recorded. From literature, VAT/GST compliance, for
instance, requires taxpayers to keep a record of their sales and
purchases. According to Rametse and Pope (2002) following the
introduction of GST, 45 per cent of small businesses in Western
Australia stated that they would upgrade or purchase a
computer because of the introduction of GST. This technological
change was likely to generate benefits for the business
managers in the form of up-to-date, easily available financial
information (Pope & Rametse 2000; Pope 2003). Technological
development and the place value of computer have enhanced
information and record management. Small businesses have
adopted the use of computers and special software to meet the
information demand of various IRS. The use of computer
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technology has translated into managerial benefits to small
businesses as it enhances speed, timeliness, effectiveness and
efficiency in the area of information processing. Researchers
who carried out a case study of Australian SMEs over three
financial years (2001-2003) after the introduction of GST,
reported numerous instances where business taxpayers were
deriving managerial benefits from the use of computerised
record keeping (Tran-Nam, Glover & Wilkin 2004). In Tran-Nam
and Glover (2004), evidence of managerial benefits derived as
result of the adoption of computerised accounting system by
small business was found by a case study which investigated
the costs and benefits of the introduction of GST in Australian
small businesses; participants in the case study reported that
adopting a CAS allowed them to have up-to-date records from
which they could retrieve information at the touch of a button.
Roberts and Wood (2001), effectiveness benefits can also arise
because the use of technology allows owner/managers to
perform new activities that contribute more to the value of the
business than the old activities they replace.
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Record keeping requirement of tax provides business
payers with other benefits; Sandford et al (1981) argued that tax
compliance might encourage taxpayers to prepare accounts
internally and that in doing so, they would be saving on external
accountant fees and audit fees. Sandford, (1981) stated that
business taxpayers who keep quality records will, as a direct or
indirect consequence, save on their overall tax compliance
costs.
Evans, Carlon & Massey (2005) identified a second potential
source of cost savings in the form of a reduction in other
compliance costs. They will save directly because better records
will make tax compliance tasks easier and consequently less
costly. In 2005, professional accountants surveyed in Australia,
reported that good record keeping also gave SMEs better
access to credit and reduced their exposure to tax audit (Evans,
Carlon & Massey 2005).
Sandford et, al (1992), additional empirical evidence on
the perception of managerial benefits by business taxpayers is
available from research on tax compliance costs undertaken in
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New Zealand and Australia in the 1990s. Nearly 50 per cent
business owners surveyed in New Zealand in 1991 agreed that
their purchase records were better kept as a result of complying
with GST obligations, and 31 per cent said that there was useful
cash collected. Sandford et. al (1981) asserted that more
stringent record keeping might lead to improved stock control.
Cash flow benefit is another major benefit of tax
compliance in tax literature. It help companies derive monetary
benefits from interest savings or earnings due to timing of
advance tax installments and, the time interval between
withholding of taxes for employees or non-employees and
deposit of withheld taxes in the government treasury. Cash flow
benefits arises when income is not taxed and remitted at the
point at which it is received, and taxpayers have the use of the
tax revenue for a period before the tax is paid to the tax authority
and the lawful delay in the remittance of tax revenues collected
by businesses on behalf of the government (e.g. PAYE or sales
tax). Sandford et al. (1981), the idea of cash flow benefits as an
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offsetting benefit of tax compliance to business taxpayers was
first popularized by Sandford and others in the early 1980s.
Tax deductibility benefits represent a transfer within the
economy, which does not reduce the social compliance costs.
Deductible expenses typically include fees paid to professional
tax advisers and these deductible expenses reduce taxpayers
tax liabilities. The benefits of the tax deductibility of compliance
activities to taxpayers were considered in some detail in an early
study by Johnston (1963). The income tax systems in most
developed countries recognize some tax compliance cost
activities as a source of legitimate tax deductible expenses.
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CHAPTER THREE
RESEARCH METHODOLOGY
3.0 INTRODUCTION
The objectives of this research is to determine perceptions
of small businesses in respect of the benefits of compliance and
to determine if small businesses are deriving any benefit as a
result of complying with their tax obligations. Research
methodology that express the ways that data will be obtained
and analysed including the hypothesis for this work is structured
into research design, sources of data and method of data
analysis
3.1 RESEARCH DESIGN
This is the framework of the study; it will guide the
researcher in the collection and analysis of data. Population of
study and Sample size of the study
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3.1.1 POPULATION OF THE STUDY
The population of the study is the group about whom the
researcher will be able to draw conclusion from since the
geographical location of this study is Benin City in Edo State, the
target population of this research study therefore is small
businesses with less than 20 employees operating in Benin City.
3.1.2 SAMPLE SIZE
The study has been restricted to the study of small businesses
operating in Benin City, Edo State. This is so because there are
no authoritative figures of the size and shape of this sector in
Nigeria. Also due to the large numerical number of small
business operating in Nigeria, few number of small business will
be used in the study during the research process. This is
because from their entire population, sample will be selected
which will in turn represent the entire population in order to give
room for manageability.
A sample of 200 small businesses will be selected using simple
random sampling for the research study. The process involves
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collecting the names of small business with registered
addresses operating in Benin City by moving from one street to
the other from their various signboards. This data is then
summed up and the samples are drawn using simple random
sampling (lottery method). Questionnaires are then administered
the sample drawn. A screening question was inserted in the
survey instrument would allow the identification of any business
with more than 20 employees.
3.2 SOURCES OF DATA
3.2.1 PRIMARY SOURCES OF DATA
The primary sources of data will involve mainly the
questionnaires personally administered by the researcher. The
questionnaire will be used to gather data on general matters
relating to the processes about tax compliance and tax benefits.
The questionnaire will be administered to the representative of
the selected small business.
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3.2.2 SECONDARY SOURCES OF DATA
There will also be the use of secondary data. Secondary data
are data which has been gathered by a different entity for their
own specific use. It was obtained from Edo State Revenue
Board.
3.3 METHOD OF DATA ANALYSIS
The data from the research is analysed using chi-square
and spearman rank correlation. Chi-square as a statistical tool
enables researchers to establish a relationship if there is any
between two categorical or nominal variables. Spearman rank
correlation defines the degree of relationship which exists
between two or more variables.
The data pertaining to the various hypotheses were
entered into Microsoft 2007 for analysis using the correlation
tool.
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3.4 LIMITATION OF THE STUDY
This study has some limitations which include: time,
finance, and the confidential nature of some individual as regard
their operations pose a major problem within my survey area.
These factors limited this research work.
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CHAPTER FOUR
PRESENTATION AND ANALYSIS OF DATA
4.0 Introduction
This chapter presents the description, analysis and
interpretation of the data obtained from the questionnaire used
for this study. The results are used to provide answers to the
research questions of the study.
4.1 Presentation of Result
Table 4.1: Distribution and Return of Questionnaire
Questionnaires Number Percentage
Distributed 200 100%
Returned 188 94%
Unreturned 12 6%
Source: Researchers field work
In course of this research, two hundred questionnaires
were administered to organizations drawn from the population.
One hundred and eighty-eight were returned while twelve were
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not returned, this represent 94% and 6% of the distributed
questionnaires respectively.
4.1.1 DEMOGRAPHIC INFORMATION
Table 4.2: Sex Distribution of Respondents
Frequency Percent Valid PercentCumulative
Percent
Valid Male 163 86.7 86.7 86.7
Female 25 13.3 13.3 100.0
Total 188 100.0 100.0 Source: Researchers field work
Table 4.2 shows that respondents were male dominant. The
male sex accounted for 86.7% of the respondents while 13.3%
of the respondents were females.
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Table 4.3: Age Distribution of Respondents
Frequency Percent Valid Percent
Cumulative
Percent
Valid Under 30 yrs 38 20.2 20.2 20.2
30-39yrs 125 66.5 66.5 86.7
40-49yrs 25 13.3 13.3 100.0
Total 188 100.0 100.0 Source: Researchers field work
Table 4.3 shows 125 respondents were within age bracket 30
39 years of age and this accounted for 65.5% of the returned
questionnaires while 38 respondents (20.2%) were under 30
years of age. Also 25 respondents were within the age bracket
of 40 49 years of age.
Table 4.4: Educational Qualification of Respondents
Frequency Percent Valid Percent
Cumulative
Percent
Valid Primary 13 6.9 6.9 6.9
SSCE/GCE/WAEC 25 13.3 13.3 20.2
NCE/OND 50 26.6 26.6 46.8
B.Sc/HND 75 39.9 39.9 86.7
Others 25 13.3 13.3 100.0
Total 188 100.0 100.0 Source: Researchers field work
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Table 4.6: Distribution of registered business tax payers
QuestionResponse Percentage
Yes No Yes No
Is your company registered for tax? 63 125 33.51% 66.49%
Do you regularly pay your tax? 175 nil 93.1%
Source: Researchers field work
In Table 4.6, 63 businesses are registered to pay tax and
125 businesses are not registered to pay tax. This value
translates 33.51% and 66.49% respectively. Also 175
respondents indicated their businesses pay their tax regularly,
this account for 93.1% of the total returned questionnaires.
Table 4.7: Tax Obligation
Frequency Percent Valid Percent
Cumulative
Percent
Valid Income tax 175 93.1 93.1 93.1
PAYE 13 6.9 6.9 100.0
Total 188 100.0 100.0 Source: Researchers field work
In Table 4.7, 175 businesses representing 93.1% pay Income
Tax while 13 businesses representing 6.9% is saddle with Pay
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4.1.3 RESEARCH QUESTION
Research Question 1: What positive relationship exists
between tax compliance by an organization and improvement in
its accounting information system?
Table 4.8: Tax compliance and improvement of accountinginformation system
Tax Compliance andAccounting InformationSystem
1 2 3 4 5 mean
1 Complying with taxobligations has help toimprove my accountinginformation system
13 12 38 87 13 163 3.46
2 Complying with recordkeeping task of tax
compliance has helped ourbusiness to developAccounting InformationSystem
13 50 0 38 87 188 3.72
3 Tax compliance obligationshave enabled myorganization to acquirecomputerized accountingsystem
25 38 12 100 13 188 3.20
4 Acquisition ofcomputerized accountingsystem has improved ourAccounting InformationSystem
50 13 0 25 100 188 3.60
Source: Researchers field work
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Table 4.8 show the benefit of tax compliance in terms of
improvement in accounting information system of small business
taxpayers. All the items in the table were accepted by the
decision mean range of 3.00 and above. All the items in the
table have mean value greater than 3.00. In item 1, 100
businesses agreed that complying with tax obligations has
helped to improve their accounting information system while 25
disagreed. To items 2, 3 and 4 a close observation revealed
125, 113 and 125 respondents agreed respectively while 63
each disagreed. There was a general improvement in
accounting information following tax compliance by businesses.
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Research Question 2: What positive relationship exists
between tax compliance by an organization and improvement to
its internal controls?
Table 4.9: Tax compliance and improvement of internalcontrol
Tax compliance andimprovement in internalcontrol
1 2 3 4 5 Mean
1 Complying with taxobligations has help toimprove my businessinternal controls
12 38 25 38 75 188 3.67
2 Tax complianceencourages taxpayers toprepare their accountsinternally.
13 75 0 87 13 188 3.06
3 Our internal control haveimproved with adoption ofour tax AccountingInformation System
12 13 12 38 113 188 4.21
4 Record keeping task of taxcompliance lead toimproved stock control.
12 63 13 75 25 188 3.20
5 Improved internal control in
our business has improvedour inventory management
25 25 0 125 13 188 3.40
6 Improved internal control inour business has improvedour cash flow monitoring.
12 25 25 113 13 188 3.48
Source: Researchers field work
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In Table 4.9, all the items has a mean value greater than
3.00 and respondents all indicated that tax compliance results in
improvement in internal control of businesses.
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Research Question 3: What positive relationship existsbetween tax compliance by an organization and saving in costs?
Table 4.10: Benefits of tax compliance in terms of savingsin cost
Tax compliance andsaving in cost.
1 2 3 4 5 mean
1 Complying with taxobligations has help toincrease my cash flow from
taxes and reduce tax cost
0 13 25 63 87 188 4.19
2 Book keeping requirementof Tax compliance reducescost on accountants andaudit fee
63 25 0 63 37 188 2.93
3 Tax compliance minimizesoperating cost
0 50 13 50 75 188 3.80
4 Tax compliance enabled our
organization to prepare ouraccount internally.
0 13 13 75 87 188 4.26
5 Record keeping task of taxcompliance had stopped ourbusiness from hiringexternal accountant.
13 13 25 12 125 188 4.19
6 Record keeping task of taxcompliance have lead tosavings on accountant time.
13 0 13 75 87 188 4.19
Source: Researchers field work
In Table 4.10, item 2 have a mean value of 2.93 which is less
than the decision mean value of 3.00. It reveals that
respondents did not accept that accept that book keeping
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requirement of tax compliance reduces cost on accountant and
audit fee. All other items in the table have mean value greater
than 3.00
Research Question 4: What positive relationship exists
between tax compliance by an organization and its business
performance via improved accounting information?
Table 4.11: Tax Compliance and business performance
Tax compliance andbusiness performance
1 2 3 4 5 Mean
1 Complying with taxobligations has help toimprove the knowledgeof my business financialposition
12 63 0 63 50 188 3.40
2 Complying with taxobligations has help toimprove my knowledgeof business profitability
38 38 25 87 0 188 2.86
3 Complying with taxobligations has help toimprove creditmanagement in mybusiness
13 25 25 100 25 188 3.53
Source: Researchers field work
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Table 4.11 captures the responses of respondent on
business performance resulting from improved accounting
system. Respondents response in term item 2 has a mean
value less than 3.00 while items 1 and 3 have a mean value
greater than 3.00. Respondents agreed to that complying with
tax obligations has helped to improve the knowledge of business
financial position and improve credit management.
4.2 Data Analysis
4.2.1 Hypotheses Testing
Data used for analysis in testing the various hypotheses
was obtained from Table 4.8, 4.9, 4.10 and 4.11 respectively.
The strongly disagree and disagree were summed up and taken
as disagreed while strongly agree and agree were summed up
as agreed. Undecided were taken as a unity
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Hypothesis 1:
H0: There is no positive relationship between tax compliance by
an organization and improvement in its accounting information
system.
Agree Disagree Undecided No response Total
1 100 (115.75) 25 (53.5) 38 (12.5) 25 (6.25) 188
2 125 (115.75) 63 (53.5) 0 (12.5) 0 (6.25) 188
3 113 (115.75) 63 (53.5) 12 (12.5) 0 (6.25) 188
4 125 (115.75) 63 (53.5) 0 (12.5) 0 (6.25) 188
Total 463 214 50 25 752
Expected values in bracket
X2 = _(o-e)2 / e
X2 = 175.9698
X2tabulated = 16.92; df = 9, P=0.05.
We reject the null hypothesis at 0.05 level of significance
and accept the alternative hypothesis that there is a positive
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Hypothesis 2,
H0: There is no positive relationship between tax compliance by
an organization and improvement to its internal controls.
Agree Disagree Undecided Total
1 113 (121.3) 50 (54.17) 25 (12.5) 188
2 100 (121.3) 88 (54.17) 0 (12.5) 188
3 151 (121.3) 25 (54.17) 12 (12.5) 188
4 100 (121.3) 75 (54.17) 13 (12.5) 188
5 138 (121.3) 50 (54.17) 0 (12.5) 188
6 126 (121.3) 37 (54.17) 25 (12.5) 188
Total 728 325 75 752
X2 = _(o-e)2 / e
X2cal = 118.77
X2tabulated = 18.31; df = 10, P=0.05.
We reject the null hypothesis at 5% level of significance as X2cal
is greater than X2tabulated and then accept the alternative
hypothesis that there is a positive relationship between tax
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compliance by an organization and improvement to its internal
controls.
Correlation Co-efficient Analysis of Table 4.9
BizI.C InternalAcct AIS Stockcontrol InventoryMangt. cashflowBizI.C 1.00InternalAcct 0.38 1.00AIS 0.72 0.77 1.00Stockcontrol 0.40 0.96 0.82 1.00InventoryMangt. 0.78 0.73 0.90 0.76 1.00cashflow 0.69 0.80 0.94 0.83 0.93 1.00
There is positive relationship with between tax compliance
by an organization and improvement to its internal controls.
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Hypothesis 3:
H0: There no positive relationship between tax compliance by an
organization and saving in costs.
Agree Disagree Undecided Total
1 150 (139.33) 13 (33.83) 25 (14.83) 188
2 100 (139.33) 88 (33.83) 0 (14.83) 188
3 125 (139.33) 50 (33.83) 13 (14.83) 188
4 162 (139.33) 13 (33.83) 13 (14.83) 188
5 137 (139.33) 26 (33.83) 25 (14.83) 188
6 162 (139.33) 13 (33.83) 13 (14.83) 188
Total 836 203 89 752
X2 = _(o-e)2 / e
X2 = 185.0019
X2tabulated = 18.31; df = 10, P=0.05.
We reject the null hypothesis at 0.05 level of significance
and accept the alternative hypothesis that there is a positive
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relationship between tax compliance by an organization and
savings in cost.
Correlation Co-efficient Analysis of Table 4.9
reducetaxcost accountant&auditfee operatingcost Int.acct Ext.accountant accountanttime
reducetaxcost 1.00accountant&auditfee 0.83 1.00operatingcost 0.88 0.90 1.00internalacct 0.96 0.79 0.82 1.00externalaccountant 0.89 0.74 0.88 0.87 1.00accountanttime 0.94 0.72 0.77 0.99 0.87 1.00
There is positive relationship between tax compliance by an
organization and saving in cost.
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Correlation Co-efficient Analysis of Table 4.10
BizFin.Position Bizprofitability creditmangt
BizFin.Position 1.00Bizprofitability 0.93 1.00creditmanagement 0.85 0.87 1.00
There is a positive relationship between tax compliance by
an organization and its business performance via improved
accounting information system. Complying with tax obligations
has help to improve my knowledge of business profitability and
complying with tax obligations has help to improve credit
management in my business
4.3 RESEARCH FINDINGS
From the 175 respondents that pay their tax regularly, 100
respondents indicated that complying with tax obligations has
help to improve their accounting information system, 125
indicated that complying with record keeping task of tax
compliance has helped their business to develop Accounting
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Information System, 113 indicated Tax compliance obligations
have enabled their organization to acquire computerized
accounting system
And 125 respondents indicated acquisition of computerized
accounting system has improved their Accounting Information
System. This is evident in the positive mean value of these
questions.
The questions that continued hypothesis two, 113
respondents indicated that complying with tax obligations has
help to improve their business internal controls, 100 respondents
indicated that Tax compliance encourages taxpayers to prepare
their accounts internally, 151 respondents indicated that their
internal control have improved with adoption of our tax
Accounting Information System, 100 respondents indicated
Record keeping task of tax compliance lead to improved stock
control, 138 respondents indicated improved internal control in
their business has improved their inventory management and
126 respondents indicated that improved internal control in their
business has improved their cash flow monitoring.
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The respondents all identified improvements to record
keeping system via Accounting Information System,
improvements to cash flow monitoring, improvements to stock
control, improvements to credit management, savings on
accountant costs and better knowledge of financial affairs as
benefits of tax compliance. The result of this research is in
concord with result previous researches on benefits of tax
compliance in small businesses such as Lignier (2009), he
concluded in his work that large majority of small business
taxpayers believed that, as a result of tax compliance
requirements their record keeping had improved, and that they
had a better knowledge of their financial affairs.
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CHAPTER FIVE
SUMMARY OF FINDING, CONCLUSION AND
RECOMMENDATIONS
5.0 INTRODUCTION
The chapter synthesizes the preceding four chapters and
concludes the project. Discussion is structured into summary of
the findings, conclusion and recommendation.
5.1 FINDINGS AND DISCUSSION
The thrust of this study is benefits of tax compliance to
small business taxpayers in Nigeria. To undertake the study, this
work was structured into five chapters; chapter one articulated
the study background, statement of research problem, research
questions, objectives of the research, research hypothesis,
scope, and significance of study. Chapter two reviewed relevant
literatures while Chapter three presented the research
methodology and Chapter four presented the results obtained
from the study.
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This study has five objectives; to determine positive
relationship between tax compliance by an organization and
improvement in its accounting information system, to determine
the positive relationship between tax compliance by an
organization and improvement to its internal controls, to
ascertain whether there is positive relationship between tax
compliance by an organization and saving in costs, and to
determine positive relationship between tax compliance by an
organization and its business performance via improved
accounting information.
Sandfords prediction in the past that GST in Australia or
VAT, its British equivalent was likely to generate significant
managerial benefits for small businesses, because it compels
owner-managers to keep detailed and up-to-date records of their
transactions is also true from the result of this research. It was
observed that tax benefits occur because the more stringent
record keeping practices imposed by tax compliance obligations
will lead to a better knowledge of financial affairs by business
taxpayers; therefore a better knowledge of financial affairs
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appeared to be associated with compliance with tax
requirements.
It was observed that the use of computers and the
increased level of AIS sophistication brought about by tax
compliance would lead to an improvement in the variety and the
quality of the information produced by these systems. The result
shows that record keeping requirement of tax compliance has
resulted in improved accounting information system of small
business taxpayers. This observation is in line with the assertion
of Lignier (2009); managerial benefits may be derived by
business taxpayers as a result of record keeping requirements
imposed by tax compliance obligations.
From the research it was observed that tax compliance
has resulted in improved information system, internal control,
cost saving and there is positive relationship between tax
compliance of small businesses and its improvement in its
accounting information system, internal controls, saving in costs
and business performance via improved accounting information.
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5.2 CONCLUSION
There is an extensive debate concerning benefits of tax
compliance by small business taxpayers. It was gathered that
recording keeping is a basic requirement of tax compliance and
this requirement have improved the Accounting Information
System and internal control mechanism of small businesses. In
literature it has been asserted that businesses that have to keep
records for taxation purposes generally have a greater report
output than businesses with no tax obligations. This would
indicate that while most businesses maintain core accounting
functions to allow the monitoring of key business indicators, the
system often remains very informal in the absence of tax
imposed record keeping requirements.
5.3 RECOMMENDATION
Based on the research findings, I therefore recommend
that the following factor should be taken into consideration;
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i. Record keeping activities should be intensity in small
businesses as this will improve their accounting system
and internal control.
ii. Tax compliance obligation of recording keeping should be
made everyone affair to adequately reap the benefits of
stock management, improved credit management, and
saving in cost.
iii. Small businesses should registered with tax authorities to
able to subject their business to various tax obligations
and hence reap its benefits
5.4 FUTURE RESEARCH
Future research could proceed in a number of directions.
First, more extensive studies are needed to cover a wider cross-
section of small businesses across businesses in Nigeria. Such
a large scale study will produce data on benefits of tax
compliance by small business taxpayers. Second, tax benefits to
small business have not been studied in Nigeria; therefore, the
forms of tax benefits require further attention.
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REFERENCES
Allingham, M. G. and Sandmo, A. (1972) Income Tax Evasion:A Theoretical Analysis, Journal of Public Economics, 1:323-38.
Armington, C. and Marjorie, O., (1982) Small Business HowMany Jobs? Brookings Review. I-1, pg 14-17.
Beyene, A. (2002); Enhancing the Competitiveness andProductivity of Small and Medium Scale EnterprisesSMEs in Africa: An Analysis of Differential Roles of
National Governments Through Improved SupportServices. Africa Development Vol. XXVII
Birch, D. L., (1979), The Job Generation Process. M.I.T.Program on Neighborhood and Regional Change:Cambridge, MA.
Boockholdt, J. (1999), Accounting Information SystemsTransaction Processing and Control. New York, The Mac-
Graw-Hill companies
Brown, D. (1985) Business Ethics: Is Small Better?, PolicyStudies Journal, 13(4): 766-75.
Cunningham J. B. and Lischeron, J. (1991) DefiningEntrepreneruship, Journal of Small BusinessManagement, 29(1).
Hall, C., (2007), When the Dragon Awakes: Internationalization
of SMEs in China and Implications for Europe, CESifoForum, Vol. 8, No. 2, pp.29-34.
Jackson, B., and Milliron, V., (1986) Tax Compliance Research:Findings, Problems, and Prospects Journal of AccountingLiterature, 5: 125.
Johnston, K. S.,(1963), Corporations Federal Income TaxCompliance Costs: A Study of Small, Medium-size, and
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Large Corporations. Bureau of Business ResearchMonograph No. 110. Columbus: Ohio State University.
Nicolaou, A., (2000) A Contingency Model of PerceivedEffectiveness in Accounting Information Systems:Organizational Coordination and Control Effects.International Journal of Accounting Information Systems,Vol. 1, pp. 91-105
Richardson, M., and Sawyer, A., (2001) A Taxonomy of the TaxCompliance Literature: Further Findings, Problems andProspects 16 Australian Tax Forum 137.
Roberts, M., and Wood, M., (2001), The Strategic Use ofComputerised Information Systems by a Mico Enterprise.15(1/2) Logistics Information Management 115.
Roth, J., Scholz J. and Witte, A., (1989) Taxpayer Compliance:An Agenda for Research pg 21.
Sandford, C. (ed.), (1995) Taxation Compliance Costs:Measurement and Policy, Fiscal Publications, Bath.
Sandford, C., and Hasseldine, J., (1992) The Compliance Costsof Business Taxes in New Zealand. Institute of PolicyStudies, 96-97.
Sandford, C., Godwin, M., and Hardwick, P., (1989)Administrative and Compliance Costs of Taxation. FiscalPublications, 118.
Sandford, C., Godwin, M., Hardwick, P., and Butterworth, M.,
(1981) Costs & Benefits of VAT. Heinemann, 94.
Sandford, C., Michael G., Peter H., and Butterworth, M. I. (1981)Costs and Benefits of VAT. London: Heinemann
Tran-Nam, B., and Glover, J. (2004) The GST recurrentcompliance costs/ benefits of small business in Australia:A case study approach, 10(4) New Zealand Journal ofTaxation Law and Policy, 344.
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DEPARTMENT OF ACCOUNTING
FACULTY OF MANAGEMENT SCIENCESUNIVERSITY OF BENIN
BENIN CITY
Dear Respondents,
I am a final year student of Department of Accounting of the University of
Benin. I am conducting a research investigation on benefits of tax
compliance to small business tax payer. Please, assist me to fill this
attached questionnaire. Any information supplied by you will be treated with
utmost confidentiality and will be used for the stated academic purpose only.
Thank you.
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DEPARTMENT OF ACCOUNTINGFACULTY OF MANAGEMENT SCIENCES
UNIVERSITY OF BENINBENIN CITY
QUESTIONNAIRE ON BENEFITS OF TAX COMPLIANCE TO SMALL
BUSINESS TAX PAYER.
Small businesses are subject to numerous regulations such as tax
obligation which they are expected to fulfill; meeting these various tax
obligations constitutes Tax compliance. Business taxpayers derived
benefits imposed by tax compliance activities and these benefits include
managerial benefits in the form of improved financial information and
improved managerial decision making, cash flow benefits and deductibility
benefits.
INSTRUCTION: Read the questionnaire carefully, and tick ( ) your choices
of answer appropriately; where necessary give other relevant information.
Part A: Background information
1. Sex: Female ( ) Male ( )
2. Age: under 30 ( ) 30-99 ( ) 40-49 ( )
50-59 ( ) 60 or over ( )
3. Educational Qualification: Primary ( )
SSCE/GCE/WAEC ( ) NCEOND ( ) B.Sc/HND ( )
Other (please
state):___________________________
4. How old is this business? 1-2 years ( ) 3- 5 years ( )
6-10 years ( ) More than 10 years and up to
20 years ( )
5. This business is run as a: ( ) Sole proprietor ( )
Partnership ( ) Company ( ) Trust ( ) Multiple
legal entities (e.g. a company and a trust, or several companies)
6. Is your company registered for tax? Yes ( ) No ( )
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7. Do you regularly pay your tax? Yes ( ) No ( )
8. Please indicate the tax obligations of your business? Income
Tax ( ) Pay As You Earn (PAYE) ( ) VAT ( )
Others____________________
Part B:
Below is a list of statement about benefits of tax compliance to small
businesses. Please use the scale below to answer the following questions
ticking the appropriate box.
Strongly Disagree = 1Disagree = 2Neither agree nor disagree = 3Agree = 4Strongly Agree = 5
1 2 3 4 5
1. Complying with tax obligations has benefits thatcompensate some of the tax costs
2. Complying with tax obligations has help toimprove my business record keeping
3. Complying with tax obligations has help toimprove the knowledge of my business financialposition
4. Complying with tax obligations has help toimprove my knowledge of business profitability
5. Complying with tax obligations has help toincrease my cash flow from taxes and reducetax cost
6. Complying with tax obligations has help toimprove my accounting information system
7. Complying with tax obligations has help toimprove my business internal controls
8. Complying with tax obligations has help toimprove credit management in my business
9. Complying with tax obligations has help to
improve my stock control (inventory)
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ACCOUNTING INFORMATION SYSTEM
10.
Complying with record keeping task of taxcompliance has helped our business todevelop Accounting Information System
11.
Tax compliance obligations have enabled myorganization to acquire computerizedaccounting system
12.
Acquisition of computerized accounting systemhas improved our Accounting InformationSystemINTERNAL CONTROLS
13.
Tax compliance encourages taxpayers toprepare their accounts internally.
14.
Our internal control have improved withadoption of our tax Accounting InformationSystem
15.
Record keeping task of tax compliance lead toimproved stock control.
16.
Improved stock control in our business hasimproved our inventory management
17 Improved internal control in our business hasimproved our cash flow monitoring.SAVING IN COSTS
18. Book keeping requirement of Tax compliancereduces cost on accountants and audit fee19.
Tax compliance minimizes operating cost
20.
Tax compliance enabled our organization toprepare our account internally.
21.
Record keeping task of tax compliance hadstopped our business from hiring externalaccountant.
22 Record keeping task of tax compliance have
lead to savings on accountant time.
Thank you for your co-operation.