TAX PLANNING AND COMPLIANCE AMONG REGISTERED SMALL AND MEDIUM SCALE ENTERPRISES IN SELECTED SOUTHWESTERN STATES IN NIGERIA
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Date
2020
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Abstract
This st udy exa mi ned t he level of tax planni ng activities a mong Small and Medi um scal e
Ent erprises (SMEs) i n sel ected Sout hwest ern Stat es in Ni geria and determi ned t he compliance
level of SMEs t o tax policies in the selected states. It also investigated the deter mi nants of tax
compliance a mong SMEs and anal ysed t he effects of tax planni ng on compl iance a mong SMEs i n
the selected states. These were wit h a view t o provi di ng i nfor mati on on how t ax pl anni ng a mong
S MEs enhanced compliance wit h tax policies.
This st udy e mpl oyed survey research desi gn. Primar y data were sourced from registered SME
operat ors who are resi dent in Lagos, Oyo and Osun St ates. The choi ce of these states was i nfor med
by t he fact that they have the hi ghest numbers of S MEs i n Sout hwestern Nigeria. Usi ng Ya mane
for mul a, the st udy surveyed a sa mpl e size of 400 SMEs out of 21, 922 who are registered wit h t he
Small and Medi um Enterprises Devel opment Agency of Ni geria (SMEDAN) as at 2013.
Pur posi ve sa mpli ng techni que was used t o select the respondents. Dat a on variables such as level
of tax planni ng acti vities, compliance level of SMEs t o tax policies, deter mi nants of tax
compliance and t he effect of tax planni ng on compliance were sourced t hrough t he admi nistrati on
of struct ured questi onnaire. Dat a collected were anal ysed usi ng mean, standard devi ati on, and
Or di nary Least Square multiple linear regressi on anal ysis.
The results showed t hat the level of tax planni ng acti vities a mong registered SMEs i n
Sout hwestern Ni geria is hi gh rangi ng from cash met hod of accounti ng 76 %, tax rate 69 %,
invest ment in securities 63 % t o tax i nfor mation and depreciation 69% a mong S MEs i n
Sout hwestern Ni geria) The results also showed t hat the compliance level of SMEs on average with government tax policies was moderate (55. 5%). In addition, the st udy i dentified taxpayers’ attitude
(66 %), busi ness fact ors (61. 25 %), econo mi c environment al fact ors (58. 7 %), and tax
admi nistrative fact ors (51 %) as maj or deter mi nants of tax compliance a mong SMEs. Lastl y, the
results reveal ed t hat cash met hod of accounti ng (t = 3. 16, p < 0. 05), favourabl e tax rate (t = 3. 13,
p < 0. 05), provisi on of tax i nfor mati on (t = 2. 58, p < 0. 05), and depreciation deducti on usi ng cost
segregati on (t = 2. 50, p < 0. 05) had positive and si gnificant effect on tax compliance a mong SMEs.
The st udy concl uded t hat tax planni ng enhanced t he compliance of SMEs t o tax policies i n
Sout hwestern Ni geria.