Effects of economic deterrence variables and royalty rates on petroleum profit tax compliance in Nigeria: an empirical analysis

Purpose The oil and gas sector are among the nonrenewable energy sectors that contribute immensely to the economic development of more than 98 countries around the globe. Nigeria depends largely on revenue from oil and gas. Unfortunately, oil and gas companies mostly evade taxes. This study aims to investigate the effects of variables subsumed in the economic deterrence theory of Allingham and Sandmo (1972), which comprise (tax rate, penalty and detection probability) with one additional variable royalty rates (RR) on petroleum profit tax compliance (PPTC). Design/methodology/approach The study used a survey to collect data from 300 local and multi-national oil and gas companies in Nigeria. SPSS version 25 and partial least squares-structural equation modeling (PLS-SEM) version 3.8 were used to analyze the data. Findings The results reveal that there is a negatively significant relationship between tax rate and RR and PPTC. The findings also show a positive and significant relationship between penalty and detection probability and PPTC. Originality/value The implication of the current study is that the current tax rate and RR are determinants of PPTC in Nigeria. Policymakers, in collaboration with the tax authority, should revisit these variables to enhance the level of PPTC, which could lead to an overall improvement in the country’s tax revenue.

TAX COMPLIANCE: THEORIES, RESEARCH DEVELOPMENT AND TAX ENFORCEMENT MODELS

Tax compliance is still a serious problem in various countries. This is indicated by the low level of tax compliance and tax ratio. This paper aims to discuss tax compliance from three main perspectives, namely theories about tax compliance, research variables derived from the theory put forward, and models of tax compliance enforcement. Broadly speaking, this theory is divided into two, namely the economic-deterrence model and the fiscal and social psychology model. For a discussion of the research variables that have been tested before, this article follows the classification proposed by Devos (2014). Devos divides these variables into three classifications, namely tax / moral ethics variables, equity and fairness variables and deterrence measures variables. This writing also discusses tax compliance as a behavioral phenomenon. Next, the models of tax law enforcement are explained as proposed by Alm and Torgler (2011) and several other proposed models. Alm and Torgler classified the models into three paradigms, that is, traditional deterrence paradigm, services paradigm, and trust paradigm. These models are proposed to build a mutually beneficial enforcement model for tax authorities and taxpayers.

Motieven voor regelovertreding: een onderzoek onder ondernemers

Motives for Non-compliance: A Study Among Business Entrepreneurs Motives for Non-compliance: A Study Among Business Entrepreneurs S. Goslinga and A. Denkers, Gedrag & Organisatie, volume 22, March 2009, nr. 1, pp. 3-22 Starting from the idea that to be effective, law enforcement should target on the main motives for non-compliance with legal rules, this study examined which factors influence non-compliance intentions of business entrepreneurs. Data were collected by means of a telephone survey among 1.377 Dutch business entrepreneurs. Besides background variables, the questionnaire assessed motives and intentions with regard to compliance and non-compliance. Regression analysis showed that non-compliance intentions are stronger when personal and social norms do not support compliance. Furthermore, non-compliance intentions increase when economic deterrence (based on the perceived chance of detection and sanction severity) is weak and there are more opportunities to deviate from the rules. In addition, results show that economic deterrence has little effect on non-compliance intentions when social norms support compliance and that social norms have more impact on non-compliance intentions when the personal norm does not support compliance. Implications of these findings for the enforcement of rules and regulations that apply to business entrepreneurs are discussed.