EXPLORING THE POLITICAL ECONOMY OF TAX COMPLIANCE IN NIGERIA: INSTITUTIONAL BARRIERS AND REFORM PATHWAYS

This study investigated the political economy of tax compliance in Nigeria: barriers and reform pathways. This study focuses on identifying the barriers impeding effective revenue generation and the reform strategies required to enhance compliance. This study uses qualitative methods, relying heavily on secondary data from academic articles, government reports, and policy documents. The findings show that the issues causing tax evasion in Nigeria are so intertwined that they affect each other. Weak deterrent measures and poor enforcement capacity, as a result, play the role of limiting penalties and audits to deter evasion. In addition, low taxpayer knowledge and limited education, particularly among small and medium enterprises (SMEs), tend to increase the incidence of underreporting and procedural errors. Then, corruption and governance failures not only create a friendly atmosphere for collusion between taxpayers and officials but also discourage voluntary compliance due to widespread distrust in the government. Technical and administrative constraints, such as inadequate automation systems, lack of integrated taxpayer databases, and cash-dominated transactions, have a severe impact on efficiency. Lastly, the enormous informal economy, which accounts for more than half of Nigeria’s GDP and is still beyond the reach of formal tax administration, is reducing the effective tax base. The study has also gone beyond problems to offer solutions that focus on voluntary compliance initiatives, continuous taxpayer education, technological modernization, and institutional capacity building as a major concern. Study also mentions that the fight against corruption through transparency and accountability and the move toward a simplified regime to ensure that the poor are not caught in a tax trap are essential elements of a reform program that can turn the country’s revenue collection system around. Finally, the research in this area concludes that the tax compliance crisis overhead in Nigeria is not only problem of technical issues but also deeply rooted political and institutional structures. Thus, it suggests the need for governance reforms coupled with administrative modernization to be comprehensive and designed to the financial muscle and achieve sustainable development.