Digital Tax Administration and Tax Compliance in Nigeria Informal Sector

Abstract

In an era characterized by growing globalization and increased fiscal oversight, tax compliance has become a significant concern for governments, businesses, and individuals globally (Bruce-Twum, 2023). This study seeks to examine the impact of digital tax administration on tax compliance within the informal sector in the Southwest states of Nigeria. The study employed a survey research design to collect primary data using a structured questionnaire, targeting artisans, street vendors, small-scale traders, service providers, and other self-employed individuals in the Southwest States of Nigeria. These individuals typically operate outside formal tax channels. A total of 600 questionnaires were distributed, with 547 completed responses received, providing a substantial and representative sample. The study used purposive sampling to select participants with relevant characteristics for the research. To ensure the reliability of the questionnaire, a Cronbach's Alpha test was conducted. Data analysis involved both descriptive statistics (such as mean, variance, skewness, and kurtosis) and inferential statistics (including correlation and regression analysis). The regression analysis showed that both technical know-how and digital payment platforms have positive and statistically significant impacts on tax compliance within the informal sector in the Southwest states of Nigeria. The study concludes that enhancing technical skills and expanding access to digital payment platforms can significantly improve tax compliance within the informal sector in the Southwest states of Nigeria. Therefore, this study suggested that Government and relevant agencies should invest in training programs aimed at improving the technical know-how of individuals and businesses in the informal sector.