THE INFLUENCE OF TAX EDUCATION ON TAX COMPLIANCE IN NIGERIA
CHAPTER ONE
INTRODUCTION
1.1    BACKGROUND TO THE STUDY
    Taxes  and  how  it  is  paid  is  one  of  the  dynamic  subject  matter  of  governance  in  the  developing  and  developed  Nations.  Tax is explained as an essential payment, enforced by government, to citizens without receiving any identifiable returns for their contribution. But they have the advantage of living in a relatively educative, healthy and safe society (Nightingale, 2001). Likewise,  tax  is  levy  on  the  citizens  by  the  tax regime  based  on  the  income  level,  profit,  property,  wealth  and  consumption  of  individuals  and  corporate   organizations to enable the government obtain revenue required for the provision of basic amenities such as, security and well-being of the citizens (Anyanduba, 1999). Taxpayers’ education helps to give a foreknowledge of the issues regarding the importance of taxation to the state and the imperative level of contribution of the revenue generated to infrastructure development and the implication of noncompliance (Ayanilo, 2015).
    Educating taxpayers has become a key strategy to enhancing the knowledge of taxpayers on the penalties involved in non-compliance behaviour, which in turn helps to facilitate the tax system that appears to be a complex social mechanism but realistic in tax compliance level of the taxpayers (Olowookere & Fasina, 2013). Due to the nature of Nigeria tax system and technical complexity (contracting same tax collections to different agents, inflicting of unusual attack to tax payers, double taxation etc) of the fiscal and tax related policies, they rarely raise public affection or sustained curiosity. Therefore an increase of public education will probably strengthen the knowledge of taxpayers’ compliance in the areas of taxation (Mukasa, 2011; Mohd, 2002). Tax education is said to have two elements which include; (i) the general degree of fiscal knowledge and (ii) the specific degree of knowledge regarding tax evasion opportunities (Jackson & Milliron, I986). Tax education programme provides a platform for tax administrators of the relative importance of tax knowledge in assisting with the design of simplifying tax systems and developing a wider understanding of taxpayers' behaviour. Tax knowledge can be enlightened through tax educational programmes geared towards teaching and encouraging the taxpayers’ of the importance and relevance of tax revenue. This is a determinant discovered to have various taxpayer characteristics that affect compliance behaviour (Mohd, 2010; Somuah, 2011).
    The  Nigeria  educational  programme  has  not  included  taxation  in  their  curriculum  of  education  in  the  secondary  schools  and  tertiary  schools;  except  for  management  science  (Azubike,  2009;  Olowookere  &  Fasina,  2013;  Ocheni,  2015).  It’s  recognized  that the  greater  number  of  taxpayers  are   not  conversant  with  tax  regulation  and  the  effect  of  non-compliance  on  revenue  generation.  Oladele, Uduma and Aderemi (2013) suggested that a continuous tax education of the taxpayers’ right from early education stage such as secondary schools can enhance citizenry’s understanding of taxation. Tax knowledge and attitudes towards taxation significantly affect the compliance behaviour of the individual taxpayers hence tax education has become imperative. Tax education can be said to have a direct effect on taxpayers’ compliance (Chan, Troutman & O’Bryan, 2000). Responsive regulation encourages tax authorities to foster compliance not only through punishment but also through education that serves as encouragement and assistance to taxpayers (Braithwaite, 2007). The level of tax education received by taxpayers is an important factor that contributes to the understanding of tax requirements, especially regarding registration and filing requirements (Maseko, 2014). Tax  education  enhances  taxpayers’ knowledge  on  the  importance  of  revenue  generation  and  the  laws  and  regulations  of  taxation,  and  their  ability  to  comply  (Mohd,  2010).
    Conversely, taxpayer education level also influences the decision of the taxpayers in making non-compliance behaviour and tax evasion (Richardson, 2006). The uncertainty of tax systems reduces compliance whilst information or knowledge resulting from tax education has a positive impact on compliance (Alm, Cherry & McKee, 2010). Tax administrators are encouraged to use communications as effective tool to deliver relevant tax information. There should be continuous  tax  education  programs  among the taxpayers’ in order to encourage tax  compliance, as educating them will help to deter them from non-compliance (Hasseldine, Hite, James & Toumi, 2007). The awareness and compliance readiness of a taxpayer is important since the effectiveness of tax education maybe increase the willingness, acceptance and honesty of taxpayers. Several studies examining impact of education on tax evasion use a taxpayer’s general educational level as the approach to measure education (Richardson & Sawyer, 2001; Ritsema, Thomas & Ferrier, 2003; McKerchar, 2002; Blanthorne & Kaplan, 2008; Braithwaite, Reinhart & Smart, 2009). Higher tax knowledge is also assumed to lead to higher compliance rates (Cuccia & Carnes, 2001; Craner & Lymer, 1999).
    From the foregoing this study is motivated to investigate the influence of tax education on tax compliance in Nigeria.
1.2    STATEMENT OF THE RESEARCH PROBLEM
    Since the colonial era, the problem of taxpayers’ education to the different categories of Nigerian citizens has lingered. For some years the problem of taxpayers education has lingered and its effect is non-compliance resulting to low revenue from taxes, and no physical development actually took place, hence the impact taxpayers money on the citizens is not been felt. Many of these taxpayers in the informal sector are ignorant and many cannot read or explain tax laws and tax regulations. Consequently, these taxpayers’ may probably result to noncompliance measure due to lack of tax knowledge and understanding (Ayanilo, 2015). The publicity of tax information in Nigeria is inadequate due to the high cost of educating the populace compared to the revenue generated from taxation. Imam,  Sugeng  and  Yuli  (2014)  examined  educating  taxpayers’  as  an  mechanism  strengthens  taxpayers compliance  level.     Their findings revealed that tax education can enhance compliance. Palil and Mustopha (2011) investigated the determinants of tax compliance and found tax knowledge to improve tax compliance. Olowookere and Fasina (2013) examined taxpayers’ education as a key strategy in achieving voluntary compliance and found that tax education influences voluntary compliance.     Consequently, Aksnes (2011) identifies factor that causes taxpayers non-compliant:  such as: flexible tax morale; low education; Chan, Troutman and O’Bryan (2000) asserts that higher tax education is directly associated to a likelihood of tax compliance. Lewis (1982) report that fiscal unawareness may be the reason for the negative feelings towards taxation and, hence the need for tax education and voluntary tax compliance training. Sarker (2003) analyse the factors that can improve tax compliance in developing countries via self-assessment systems and the need to increase training and improve the working environment of tax officials.
    From  the  forgoing  the  research  problem  is  expressed  in  specific  questions,  to  bring  the  argument  to  a  testable  form  on  influence  of  educating  of  the  taxpayers  and  tax  compliance,  thus;
i.    What extent does effective tax education affect tax knowledge of the taxpayers’ compliance behaviour?
ii.    To what extent does tax education enhances knowledge of noncompliance penalties and sanctions that could affect taxpayers’ compliance behaviour?
iii.    To what extent does taxpayer educations as strategic tool and simplify tax system administration affect taxpayers’ compliance behaviour.
1.3    OBJECTIVE OF THE STUDY
    The broad objective for this study is to examine the influence of tax education on tax compliance in Nigeria. The specific objectives are stated as follows:
i.    To examine the impact of effective tax education and tax knowledge on the taxpayers’ compliance behaviour.
ii.    To determine the impact of knowledge of noncompliance penalties and sanctions on taxpayers’ compliance behaviour.
iii.    To examine the relationship between taxpayer educations as strategic tool and simplify tax system administration that enhances taxpayers’ compliance behaviour.
1.4    RESEARCH HYPOTHESES
    The hypotheses for this study are formulated below. These are stated in the null form:
i.    Effective tax education has no significant relationship with taxpayers’ compliance behaviour.
ii.    Knowledge of noncompliance has significant relationship, with penalties as well as sanctions of taxpayers’ behaviour.
iii.    Taxpayer education as strategic tool that simplify tax system administration has no   relationship with taxpayers’ compliance behaviour.
1.5    SCOPE OF THE STUDY
    The study examines tax education and tax compliance in Nigeria, using Benin City, South-South Nigeria considering the informal sector. The study will adopt the survey method to selected business centre and private schools (as informal sector) in Egor and Ovia North Local Government in Benin City, Edo State. This outlet was chosen at the discretion of the researcher.  
1.6    SIGNIFICANCE OF THE STUDY
    The significance of any study lies in the uniqueness of the work. The study examines tax education and tax compliance in Nigeria using selected private businesses in Benin City as case study. Findings from this study will be significant to government, investors, regulatory bodies, researchers, accountants, useful document for managers to handle issues relating to tax education and tax compliance in Nigeria.
    In general the taxpayers’ compliance behaviour can be influences by some key determinants which are expected to assist local and foreign investors in making additional informed decisions on tax compliance. This study will also help the entrepreneurs to assess their level of voluntary compliance using tax education that strengthen taxpayers’ knowledge and awareness. This study contributes to the existing literatures in the area of influence of tax education of the taxpayers’ and tax compliance in Nigeria. Hence, it will be significant to future researchers, academicians and the public.  
1.7        LIMITATIONS OF THE STUDY
    The subject of tax education and tax compliance is bedeviled with several measurement indices in the literature due to its qualitative nature. Different perception exists as to what the indices for tax education and tax compliance are. Another limitation is that there may be no absolute certainty that proxy for best situated variables that could reflect the actual concept. The problem of estimation in computations after the analysis of data was handled, using Ordinary Least Regression (OLS) model. These  constraints  was  treated  in  order  not   affect  the  robustness  of  the  study.  Consequently, effort was made to minimize these limitations as to ensure that the result obtained therein will remain, reliable, valid in relation to the estimation technique(s) employed.