TAX AUDIT PRACTICES AND TAX COMPLIANCE IN NIGERIA

Abstract

This study examined the effect of tax audit practices on tax compliance in Nigeria, with emphasis on tax audit detection rate and tax audit effectiveness and their influence on e-filing adoption and voluntary compliance rate. The study was motivated by persistent weaknesses in tax administration, tax evasion, revenue leakages and inadequate taxpayer compliance in Nigeria. A cross-sectional survey research design was adopted. The population comprised 900 personnel of the Nigeria Revenue Service across 26 tax offices in the six South-South states of Nigeria. Using Taro Yamane’s formula, a sample size of 277 respondents was determined, while 230 valid questionnaires were retrieved, representing an 83.03% response rate. Data were collected using a structured five-point Likert-scale questionnaire and analyzed using Pearson correlation and linear regression techniques. The findings revealed that tax audit detection rate had a significant positive relationship with e-filing adoption (r = 0.567, p < 0.05) and voluntary compliance rate (r = 0.680, p < 0.05). Similarly, tax audit effectiveness had a significant positive relationship with e-filing adoption (r = 0.633, p < 0.05) and voluntary compliance rate (r = 0.660, p < 0.05). The study therefore concludes that effective tax audit practices are important determinants of tax compliance in Nigeria. The findings support the deterrence perspective of the classical theory of tax compliance, which suggests that increased probability of detecting non-compliance can discourage tax evasion and encourage taxpayers to fulfil their statutory obligations. The study recommends, among other measures, the strengthening of tax audit capacity through improved technology, skilled personnel, risk-based audit systems and integrated taxpayer information systems to improve detection, facilitate e-filing and enhance voluntary compliance.