DETERMINANTS OF TAX COMPLIANCE AMONG SMALL AND MEDIUM-SCALE ENTERPRISES IN NIGERIA: EMPIRICAL EVIDENCE

Despite constituting over 96% of all enterprises in Nigeria and contributing approximately 48% of gross domestic product (GDP), small and medium-scale enterprises (SMEs) remain among the most tax-non-compliant segments of the Nigerian economy. This study investigates the determinants of tax compliance among SMEs in Nigeria, drawing on an original balanced panel dataset of 3,250 enterprises observed over ten years (2013–2022). Using a multi-model empirical approach — including ordinary least squares (OLS), fixed effects (FE), random effects (RE), and instrumental variables two-stage least squares (IV/2SLS) regressions — this paper examines the roles of five theoretically grounded control variable groups: Household Characteristics (HC), Technology Access (TA), Economic Factors (EF), Location Factors (LF), and Microfinance-Specific Factors (MSF). Findings reveal that e-filing adoption (TA) and microfinance bank (MFB) credit access (MSF) are the two strongest positive determinants of tax compliance, while perceived tax burden (EF) exerts a significant deterrent effect. Education level (HC), urban location (LF), and formal MFB registration (MSF) also emerge as significant positive drivers. These results are robust across all model specifications and pass all post-estimation diagnostic tests. The study contributes original empirical evidence to the African tax compliance literature and provides actionable guidance for Nigerian tax policy, digital infrastructure investment, and microfinance-tax linkage design. Implications extend beyond Nigeria to comparable low- and middle-income countries grappling with similar SME tax compliance challenges.