Unmasking the Shadows: Exploring Personal Income Tax Evasion and Nigeria's Macroeconomic Sustainability through a Behavioural Economics Lens

Oluwatosin Olushola, Ayoola Mary Olusoga and Pa Lamin Beyai

A chapter in Business, Management and Economics Annual Volume 2024 from IntechOpen

Abstract: This research explores the complex dynamics of personal income tax evasion in Nigeria by adopting a behavioural economics perspective. The primary objective is to uncover concealed aspects of tax evasion and assess its implications for Nigeria's macroeconomic sustainability, focusing on evidence from the federal capital territory. The study utilizes Ordered Probit model estimation for evaluation. The results reveal that variables related to social preferences, such as trust in government and fairness in the tax system, exhibit a negative association with personal income tax evasion. Conversely, the perception of corruption levels shows a positive correlation with personal income tax evasion. The study findings emphasize that trust in government, fairness in the tax system, tax simplicity, tax salience, tax projection bias, and access to credit are more effective in mitigating personal income tax evasion in Nigeria compared to other variables. Applying principles from behavioural economics, the research uncovers the underlying factors influencing individuals' decisions to evade income taxes. These insights are anticipated to provide valuable guidance for policymakers, tax authorities, and economists, fostering a nuanced comprehension of tax evasion patterns and proposing potential strategies to enhance compliance and bolster the macroeconomic stability of Nigeria.

Keywords: personal income tax; tax evasion; macroeconomic sustainability; behavioural economics; Nigeria (search for similar items in EconPapers)
JEL-codes: M00 M2 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:ito:pchaps:327480

DOI: 10.5772/intechopen.115090

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