EFFECT OF TAX AUDIT ON TAX COMPLIANCE IN KWARA STATE, NIGERIA

Olaniyi, Taiwo Azeez () and Ilesanmi, Omolabake Olufemi ()
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Olaniyi, Taiwo Azeez: Department of Accounting, Postal: University of Ilorin,, Ilorin, Nigeria,, https://journal.citn.org/
Ilesanmi, Omolabake Olufemi: Kwara State Internal Revenue Service, Postal: Ilorin, Nigeria,, https://journal.citn.org/

Journal of Taxation and Economic Development, 2019, vol. 18, issue 3, 35-47

Abstract: The frequency of tax audits and investigations in recent times by the Federal Inland Revenue Service (FIRS) and the various State Boards of Internal Revenue (SBIR) in Nigeria emanates from non-compliance attitude of taxpayers which eventually led to revenue leakages. Conversely, the ever increasing demand of the populace (infrastructure facilities) calls for effective tax drive to increase revenue base. This study therefore examines the effect of tax audit on tax compliance in Kwara state with a view to establish the difference between tax revenue in the pre and post audit periods. Secondary data in respect of tax audit, tax compliance, government revenue, government spending and penalties for 229 companies in Kwara State from 2003 to 2016 were extracted from Tax Audit Department of Kwara State Internal Revenue Service and Kwara state Audited accounts. These data were analysed using Classical Ordinary Least Square (OLS) regression method. The finding of the study reveals as follows: a significant positive relationship (p=0.0076) exist between tax audit and tax compliance in Kwara State between 2010 and 2016; a positive linear relationship (p=0.0033) between government spending and tax compliance in the State. Penalty/fine for default in tax payment has positive effect on tax compliance (p=0.0076) while tax revenue is also higher during the tax audit period (2010-2016) than the pre-tax audit period (2003- 2009). Based on these findings, the study concludes that tax audit has a significant positive impact on tax compliance. The study therefore recommends that tax audit should be carried out on a routine basis to ensure that actual revenue collected is what the relevant tax authority remits to the government, internal mechanism to check and monitor the staff of the tax audit department should be put in place to ensure accountability of tax revenue.

Keywords: Economic development; Government revenue; Tax audit; Tax compliance; Tax penalty (search for similar items in EconPapers)
Date: 2019
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