Project Paul

8/6/2019 Project Paul

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BENEFITS OF TAX COMPLIANCE TO SMALL

BUSINESS TAX PAYER

BY

OSAKUE PAUL

SSC0410958

A RESEARCH PROJECT SUBMITTED TO THEDEPARTMENT OF ACCOUNTING,

FACULTY OF MANAGEMENT SCIENCES,

UNIVERSITY OF BENIN

IN PARTIAL FULFILMENT OF THE REQUIREMENTFOR THE DEGREE OF BACHELOR OF SCIENCE

(B.Sc) IN ACCOUNTING

APRIL, 2011


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CERTIFICATION

This is to certify that this work was carried out by Osakue Paul in

the Department of Accounting, University of Benin in the 2008/2009

section.

__________________________

Engr. K. O. Ogiedu

Project Supervisor

__________________________

Prof. Izedonmi I. O.

Head of Department

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DEDICATION

To God be the Glory, without much ado, I want to sincerely

dedicate this piece of my project work to God Almighty who made it

rosy for the fruition of this project work.

More so, I want to also dedicate this project work to my ever

beloved late brother, Mr. Osakue Osamudiamen Matthew, whose

gentle soul is resting in bossom of our almighty God, and my

parents, Mr. and Mrs. Stephen Osakue who are hale and healthy.

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ACKNOWLEDGEMENT

I am sincerely grateful to God Almighty for making it possible

for me to get to this height of my educational pursuit, he saw me

through the difficult times during and after the fruition of this piece

of project work. Without mincing words, I have to acknowledge the

following people; firstly, I tremendously thank and appreciate the

tender, loving care of my indefatigable and industrious parent, Mr.

and Mrs. Stephen Osakue who financially contributed immensely to

see that my aims and objectives in the course of my education is a

success may their sources of income never go dry.

Secondly, my immense appreciation goes to my project

supervisor, Engr. K. O. Ogiedu whose contributions to my project

work and criticism made my work a huge success. Also my infinite

indebtedness goes to my fiance, Evelyn Ehiozuwa.

Finally, my infinite indebtedness also goes to my siblings; Mr.

Joseph Osakue, Mrs. Matina Ogbebor, Miss Josephine Osakue;

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may the loving grace of God continue to bless you all. Also I want

to sincerely thank my creator (Messiah) for His abundant blessing

blessings showered on me and my family. Words alone cannot

express my infinite indebtedness to all my and sundry. May He

continue to see us through in all our endeavour in life (Amen).

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ABSTRACT

This project work examines the benefits in form of managerial, cashflow and deductible derived by small business entities as a result ofcomplying with their tax obligations in Nigeria. This adopted surveymethod and data were sourced using questionnaires. The primarydata were analysed using descriptive statistics tools in MicrosoftExcel and SPSS. The Hypotheses were tested using Chi-Squareand Correlation Co-efficient.

The study found small business taxpayers recognised that taxcompliance activities led to better record keeping as a requirement

imposed by tax compliance. This has in-turn compel smallbusinesses to upgrade their accounting systems, typically in theform of computerisation. The tax compliance activities of smallhave improved their record keeping, improved knowledge of theirfinancial affairs, improved internal and stock control, and inventoryand credit management.

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LIST OF TABLES

Table 4.1: Distribution and Return of Questionnaire

Table 4.2: Sex Distribution of Respondents

Table 4.3: Age Distribution of Respondents

Table 4.4: Educational Qualification of Respondents

Table 4.5: Distribution of Business Type

Table 4.6: Distribution of registered business tax payers

Table 4.7: Tax Obligation

Table 4.8: Tax compliance and improvement of accounting

information system

Table 4.9: Tax compliance and improvement of internal control

Table 4.10: Benefits of tax compliance in terms of savings in cost

Table 4.11: Tax Compliance and business performance

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TABLE OF CONTENT

Title page .. .. .. .. .. .. .. .. i

Certification .. .. .. .. .. .. .. .. ii

Dedication .. .. .. .. .. .. .. .. iii

Acknowledgement .. .. .. .. .. .. .. iv-v

Abstract .. .. .. .. .. .. .. .. vi

List of Tables .. .. .. .. .. .. .. vii

Table of Content .. .. .. .. .. .. .. viii-x

CHAPTER ONE-INTRODUCTION

1.0 Background of Study .. .. .. .. .. 1

1.1 Statement of Research problem .. .. .. 3

1.2 Objectives of the Research .. .. .. .. 5

1.3 Statement of the Research Hypotheses .. .. 6

1.4 Scope of the Study .. .. .. .. .. 7

1.5 Significance of the Study .. .. .. .. .. 7

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CHAPTER TWO-LITERATURE REVIEW

2.1 Introduction .. .. .. .. .. .. 9

2.2 Nigerian Tax System .. .. .. .. .. 12

2.3 Small Businesses .. .. .. .. .. 14

2.4 Tax Compliance Benefits to Small Businesses .. 19

CHAPTER THREE-RESEARCH METHODOLOGY

3.0 Introduction .. .. .. .. .. .. 29

3.1 Research Design .. .. .. .. .. .. 29

3.1.1 Population of the Study .. .. .. .. .. 30

3.1.2 Sample Size .. .. .. .. .. .. 30

3.2 Sources of Data .. .. .. .. .. .. 31

3.2.1 Primary Sources of Data .. .. .. .. 31

3.2.2 Secondary Sources of Data .. .. .. .. 32

3.3 Method of Data Analysis .. .. .. .. 32

3.4 Limitation of the Study .. .. .. .. .. 33

CHAPTER FOUR- PRESENTATION AND ANALYSIS OF DATA

4.0 Introduction .. .. .. .. .. .. 34

4.1 Presentation of Result .. .. .. .. .. 34

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x

4.1.1 Demographic Information .. .. .. .. 35

4.1.2 Background Information .. .. .. .. .. 37

4.1.3 Research Question .. .. .. .. .. 40

4.2 Data Analysis .. .. .. .. .. .. 46

4.2.1 Test of Hypotheses .. .. .. .. 46

4.3 Research findings .. .. .. .. .. 54

CHAPTER FIVE-SUMMARY OF FINDING, CONCLUSION AND

RECOMMENDATIONS

5.0 Introduction .. .. .. .. .. .. 57

5.1 Findings and Discussion .. .. .. .. .. 57

5.2 Conclusion .. .. .. .. .. .. .. 60

5.3 Recommendations .. .. .. .. .. .. 60

5.4 Future Research .. .. .. .. .. .. 61

APPENDIX

Appendix 1: References .. .. .. .. .. .. 62

Appendix 2: Sample of Questionnaire .. .. .. .. 64


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CHAPTER ONE

INTRODUCTION

1.0 BACKGROUND OF STUDY

Small Businesses play an important role in economies of

any nation as they generate significant employment and output.

Evidence from the Asian Tigers attests to this fact that small

firms accounted for much of their growth; creating employment

and accelerating efficient utilization of capital. Apart from these

stated contributions, small businesses also contribute to the

wealth of any nation in their tax obligation and compliance. Tax

compliance is a global phenomenon that has been greatly

advocated for its enormous benefits to the government and the

taxpayers. Taxes are paid both by individuals and businesses.

Small business tax compliance is a function of the perceived

benefits outweighing the perceived costs.

The final Draft of Nigeria Tax Policy submitted to the

Federal Executive Council captured several definitions of the

concept of tax. Tax has been defined as a monetary charge


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imposed by the Government on persons, entities, transactions or

properties to yield revenue (National Tax Policy, final draft).

Taxes are therefore defined as a financial charge or levy

imposed upon an individual or legal entity by a State or a

component of the State (ibid). A tax is usually a monetary

charge on a persons or entitys income, property or transaction

and is usually collected by a defined authority at the Federal and

State Level. Taxes may be direct or indirect and may be

imposed on individual basis, on entities, on assets and on

transactional basis. In Nigeria, taxes are imposed on the

following: individuals; companies (Corporate Entities),

transactions and assets and obligation include registration in the

system; timely filing or lodgement of requisite taxation

information; reporting of complete and accurate information

(incorporating good record keeping); and payment of taxation

obligations on time. Meeting these obligation is referred to

obligation is termed tax compliance.

Allingham and Sandmo, (1972) tax compliance has been

understood in terms of the benefits of successful evasion


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weighed against the risk of detection and punishment. Tax

compliance is associated with cost and benefits to small

business, the former is a widely discuss subject in literatures

while the former is limited. Tax compliance induct a firm into the

formal sector, and allows the firm access to formal credit

markets, government procurement, and access to markets

including for export. Also tax compliance also provides Cash

flow benefits, managerial benefits and tax deductibility benefits

to small business. The main quantifiable form of tax compliance

benefit is the cash flow advantage which arises when

businesses have the use of tax revenues for a period before

they must be remitted to tax authorities (Sandford et al., 1989).

The thrust of this work is to evaluate the benefits of tax

compliance to small business tax payers in Nigeria.

1.1 STATEMENT OF RESEARCH PROBLEM

A number of studies have described small business

taxpayers as law abiding, responsible and ethical, taking their

tax obligations seriously (Brown, 1985; Cunningham and


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Lishercon, 1991). Nigeria economy is growing in the number of

small businesses as several incentives have been accorded

small scale industries to facilitate their development and growth.

For many small entrepreneurs in Africa in general and Nigeria in

particular, the choice to pay tax or remain in the informal sector

is a function of perceived benefits and costs. In the light of this

recognition, this study would examine the following questions:

i. What positive relationship exists between tax

compliance by an organization and improvement in

its accounting information system?

ii. What positive relationship exists between tax

compliance by an organization and improvement to

its internal controls?

iii. What positive relationship exists between tax

compliance by an organization and saving in costs?

iv. What positive relationship exists between tax

compliance by an organization and its business

performance via improved accounting information?


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1.2 OBJECTIVES OF THE RESEARCH

i. To determine positive relationship between tax

compliance by an organization and improvement in

its accounting information system;

ii. To determine the positive relationship between tax

compliance by an organization and improvement to

its internal controls;

iii. To ascertain whether there is positive relationship

between tax compliance by an organization and

saving in costs; and

iv. To determine positive relationship between tax

compliance by an organization and its business

performance via improved accounting information.


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1.3 STATEMENT OF RESEARCH HYPOTHESES

Hypotheses are tentative conjectural statement of the

relationship between two or more variable. They provide focus

for the study and give greater insight into understanding the

problems involved. For the purpose of this research work, the

following hypotheses will be tested:

H1: There is no positive relationship between tax compliance by

an organization and improvement in its accounting information

system.


an organization and improvement to its internal controls.


an organization and saving in costs.


an organization and its business performance via improved

accounting information.


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1.4 SCOPE OF THE STUDY

This study is centred on benefits of tax compliance to

small business tax payers. These benefits are managerial

benefits, cash flow and deductibility benefits. The scope of study

is limited to taxpaying small businesses in Benin City using the

definition of National Council on Industries (1991) for micro-

scale, small-scale, and medium-scale enterprises.

1.5 SIGNIFICANCE OF THE STUDY

The importance and relevance of taxation in Nigeria is

numerous to mention. Taxes are sources of government

revenue expended for developmental projects. It also used in re-

distributing the wealth of the nation. This study will aid Nigerian

Revenue Authority in their tax design and administration

policies, and very helpful to the accounting practitioners. It will

also help educate large number of small business in embracing

formalization of their businesses; this will result in higher


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revenue to government and lower compliance cost of the

revenue authority. The study will also fill the existing knowledge

gap and increase the stock of literature for other researchers.


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throughout the world; great ancient civilizations such as Egypt,

Rome, Greece, Persia, Zulu, and Benin taxed their people to

achieve a collective greatness. In the Nigerian landscape,

taxation has been in existence even before the amalgamation of

Nigeria as a political entity in 1914. Several studies have stated

that the practice of taxation were rooted the traditional system of

the Yorubas, the Binis and the Hausas.

Taxation creates a balance between the various economic

classes by the redistribution of wealth and income thereby

raising generally the quality of life and increasing social

cohesion. The principles underlying taxation were enunciated by

Adam Smith as long ago as 1776 and till date his four cannons

of taxation; namely economic efficiency, equity, transparency

and certainty and administration remained valid.

Paul and Roland (1990) conceptualize some reasons for

taxation and they are summarized as follows:

i. Provision of Public goods: this type of good cannot be left

to the private market because of its immense benefit to

the general public. They stressed further th at public


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goods provides a non excludable benefit bthat is

available to everyone, regardless of who pays for it. Its

benefit is also inexhaustible; when one person enjoys it

the amount of benefit it provides to others is not

diminished. That is, the benefit derived by one person is

externalized, in that it becomes available to another

person at the same time (Umog, 1997).

ii. Encouraging the use of merit goods: Government

intervention may also be based on the view that people

are not in all cases the best judges of what is good for

them.

iii. Dealing with externalities

iv. Helping the poor. Due to market orientation and its

inclination towards the rich, taxes are collected to help the

impoverished and provide assistance for old people, the

handicapped and the needy.

v. Promoting economic stability: The general economic

stability in terms of increased and efficient production

system and employment index. In contributing to the pool

of knowledge, Eton (1998) stated that taxation is used to


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achieve the protection of home industries through

government varied instruments, fight inflation and

encourage healthy balance of payment of the country.

Other reason deduced for promoting economic stability

include: use of progressive tax and tax relief to encourage

investment.

For this study, the literature review is structured into the

following sub-themes: Nigerian tax laws and Tax Compliance

Benefits to small businesses

2.2 NIGERIAN TAX SYSTEMS

Blacks Law Dictionary defined tax as the enforced

proportional contributions from persons and property, levied by the

State by virtue of its sovereignty for the support of Government and

for all public needs. A country's tax system is a major

determinant of other macroeconomic indexes. It has also been

argued that the level of economic development has a very


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strong impact on a country's tax base (Hinricks, 1966;

Musgrave, 1969).

In Nigeria, taxes are imposed on individuals in form of Personal

Income Tax, Development Levy; on Companies in form of Companies

Income Tax, Petroleum Profits Tax, Education Tax and Technology

Tax; on Transactions in form of Value Added Tax, Capital Gains Tax,

Stamp Duty, Excise Duty, Import Duty and Export; and on Assets- this

includes taxes, such as property tax and other such taxes imposed on

land or landed property.

Personal Income Tax (PIT) was enacted in 1961. It governs the

taxation of individuals, and trustees, executors, partnership,

communities, and families. It has experienced a lot of amendments.

The current law guiding the taxation of personal incomes is the

Personal Income Tax Act (Cap P8 LFN 2004), (www.firs.gov.ng). PIT

is a tax that is imposed on individuals who are either in employment

or are running their own small businesses under a business name or

partnership. The employers of labor are deemed to be agents of the

tax authority for the purposes of remitting taxes deducted from

salaries due to employees.


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Value Added Tax (VAT) another type of tax paid by small

businesses was used to replace the sale tax decree of 1986-1988 is

managed by the federal Inland Revenue (FIR). Value Added Tax

(VAT) was introduced by decree number 102 of 1993 by the federal

military government of Nigeria. The value added tax decree took

effect form 1st January 1994 under decree at a flat rate of 5%, it is

levied on goods and services such as import, as well as professional

and banking services.

2.3 SMALL BUSINESS

There is no universally accepted definition of small

businesses comprising of Small and Medium Enterprises

(SMEs) across the globe. Definitions in each country reflect the

relative development of the prospective economies. According to

Holmes and Gibson (2001), a wide range of definitions of small

business are currently in use throughout government agencies

and among academics. These definitions involve a variety of

criteria based on the number of employees, turnover or net

assets.


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Beyene, (2002), in the USA, the small business

administration defines small business as any business with less

than 500 employees. In Nigeria, the definition of Small and

Medium Scale Enterprises has varied over the years across

various institutions. The National Council on Industrial Standards

in 1992, defined small and Medium Scale Enterprises (SMEs)

as enterprises with total cost (including working capital but

excluding cost of land) above 31 million but not exceeding

N150 million, with a labour size of between 11 and 100

employees. Small and Medium Industries Equity Investment

Scheme (SMIEIS) Revised Guidelines for Operation of the

Scheme defined a small and medium enterprise as any

enterprise with a maximum asset base of N500 million

(excluding land and working capital), and with no lower or upper

limit of staff.

Olorunshola, (2003), before 1992, different government

agencies in the Nigeria adopted different definitions for SMEs,

reflecting differences in the policy focus of the agencies. In

1992, the National Council on Industries streamlined these


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different definitions so as to remove confusion and ambiguities,

with a proviso that the official definition is subject to review

every four years. According to Udechukwu (2003), the 13th

meeting of the National Council on Industry, held in July 2003,

adopted the following definitions for micro-, small-, and medium-

scale enterprises:

Firm Type Labour Size Total CostexcludingWorkingCapital butincludingland cost

Total Costincludingworking capitalbut excludingland cost

micro/cottage Maximum of10 employees

is not more thanN1,500,000

small scaleindustry

Between 11and 100employees

N50 million

Mediumscale

labour sizeexceeds 100employeesbut is notmore than

300employees

Lies betweenN50 million andN200 million.

Central Bank of Nigerias (2004) defined Small and

Medium Scale Enterprises as any enterprises with a maximum

asset base of N200 million, excluding land and working capital,


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with the number of staff employed by the enterprise not less

than 10 and not exceeding 300.

According to World Bank (2004), there are various criteria of

size that might be used to define an SME (turnover, number of

employees, capital base, profits, extent of imports and export),

and various definitions have indeed been developed for

application in a range of countries. They defined small business

as follows:

Micro 10 or fewer employees, assets no more than

USD100,000

Small 10 to 50 employees, turnover and assets

between US$100, 000 and US$ 3 million

Medium 50 to 300 employees; turnover and assets

between US$3 to 15 million.

Across the globe, SMEs are regarded as economic

catalysts and the bedrock of all industrialized societies as they

feature prominently in economic transformation of any nation.


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They play a vital role in the mobilization of domestic product,

harnessing of local raw materials, employment generation, and

poverty reduction through sustainable livelihoods and

enhancement in personal income, technological development

and export diversification. In literature, it has been asserted that

small and medium scale enterprises contribute significantly to

improve living standards, local capital formation and high levels

of productivity and capability. Many economists also contend

that small firms offer a range of advantages over larger entities

because of their flexibility, their closeness to customers and their

important sub-contracting function (Scott 1991).

In recognition of the pivotal role of SME, several

governments have supported the growth of small business, and

the growth has been phenomenal. For example, while the

number of private SMEs recorded in China rose from zero in the

early 1980s to around 40 million now (Hall, 2007).

The increased focus on SMEs also reflects a growing emphasis

on their potentially critical role in fostering innovation,


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employment and growth, and also providing government

revenue in form of taxes.

2.4 TAX COMPLIANCE BENEFITS TO SMALL

BUSINESSES

A number of studies have described small business

taxpayers as law abiding, responsible and ethical, taking their

tax obligations seriously (Brown, 1985; Cunningham and

Lishercon, 1991). In Nigeria tax system, taxpayers obligations

were enumerated as follows:

i. Register for tax payment

ii. Determine the amount of tax payable

iii. Pay correctly and on time all taxes due or with held on

payments made including tax penalties:

iv. File a return in respect of taxes payable


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v. Keep and producer on demand all books of accounts

records, documents and return necessary for the

ascertainment of tax liability.

vi. Answer all queries and latent to notice or summons

served by the tax authorities.

vii. Co-operate with and allow tax officers full access to

premises, office or residence to search or remove

anything required for investigating tax chargeable or

bringing up a case in the law court.

viii. Give information of any other person or company

specified in a notice by the tax authorities.

ix. Pay to the tax authorities all or part of any amount of

money due to a company or person who has defaulted in

his tax obligation. If the tax authorities so direct.

x. Have a representative or tax officer designate to answer

all questions of tax payment (complains income tax).

xi. Do any other thing as may be required by the tax

authorities for a smooth administration of a tax policy.


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These tax obligations are also ascribed to business

enterprises, meeting them is simply referred to as tax

compliance. Tax compliance is the act or process of subjecting

oneself, ones incomes and business or expenditure to the

demands of the tax law. The original assumptions about tax

compliance were rooted in standard analyses of maximization of

expected income, taking into account the risks and penalties

associated with non-compliance (Allingham and Sandmo, 1972).

Roth et. al (1989) defined Tax compliance as compliance with

tax reporting requirements, namely that the taxpayer files all

required tax returns at the proper time and that the returns

accurately report tax liability in accordance with the tax laws,

regulations and court decisions applicable at the time the return

is filed. Manuwa (1996) defined tax compliance as the act or

process of subjecting oneself, ones income, business, asset or

expenditure to the demand of the tax law. Generally, tax

compliance means voluntary compliance of tax laws by

taxpayers without any effort or action by tax administration.


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The subject of tax compliance has been viewed with

feelings in the literatures, some researchers posited that tax

compliance is cost inclined and others argued that is rewarding

and beneficial. Sandford et. al (1989) asserted in their work that

the effect of complying with tax may not always be detrimental

as individuals who complete their tax return and file the

necessary information, may, at the same time, be encouraged to

engage in more efficient management of their financial affairs.

They further stressed that these benefits are likely to be more

significant in the case of businesses as compliance with the tax

system will force the business owner to introduce a more

efficient financial information system.

Benefits of tax compliance are in three folds as

documented in accounting literatures; they include managerial,

cash flow and Tax deductibility benefits. Sandford et. al (1989)

recognised cash flow benefits and managerial benefits as offsets

to compliance costs. Several studies on managerial benefits of

tax have been undertaken; prominent among them is the

Sandford VAT study that introduced concept of managerial


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benefits and attempted to quantify managerial benefits

(Sandford et. al, 1981). The term was coined due to the

attendant benefit and resultant financial management efficiency

due to businesses in complying with tax obligations. Managerial

benefits provide a basis for improved business or individual

decision making.

A cursory look at the obligations of taxpayers enumerated above

indicates information demand, and the required information is

only available through adequate record keeping by small

business. Lignier (2009) managerial benefits may be derived by

business taxpayers as a result of record keeping requirements

imposed by tax compliance obligations. In literature, it has been

asserted that record keeping result in improved information

system. Accounting information system is a computer-based

system that Nicoloau (2000) defines as a system that increases

the control and enhances the corporation inside the

organization. Boochholdt (1999) also defines accounting

information systems as systems that operate functions of data

gathering, processing, categorizing and reporting financial


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events with the aim of providing relevant information for the

purpose of score keeping, attention directing and decision-

making.

Evans, Carlon and Massey (2005) asserted that the

improved information system arises as a result of the necessity

to have a complete accounting system where all transactions

are recorded. From literature, VAT/GST compliance, for

instance, requires taxpayers to keep a record of their sales and

purchases. According to Rametse and Pope (2002) following the

introduction of GST, 45 per cent of small businesses in Western

Australia stated that they would upgrade or purchase a

computer because of the introduction of GST. This technological

change was likely to generate benefits for the business

managers in the form of up-to-date, easily available financial

information (Pope & Rametse 2000; Pope 2003). Technological

development and the place value of computer have enhanced

information and record management. Small businesses have

adopted the use of computers and special software to meet the

information demand of various IRS. The use of computer


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technology has translated into managerial benefits to small

businesses as it enhances speed, timeliness, effectiveness and

efficiency in the area of information processing. Researchers

who carried out a case study of Australian SMEs over three

financial years (2001-2003) after the introduction of GST,

reported numerous instances where business taxpayers were

deriving managerial benefits from the use of computerised

record keeping (Tran-Nam, Glover & Wilkin 2004). In Tran-Nam

and Glover (2004), evidence of managerial benefits derived as

result of the adoption of computerised accounting system by

small business was found by a case study which investigated

the costs and benefits of the introduction of GST in Australian

small businesses; participants in the case study reported that

adopting a CAS allowed them to have up-to-date records from

which they could retrieve information at the touch of a button.

Roberts and Wood (2001), effectiveness benefits can also arise

because the use of technology allows owner/managers to

perform new activities that contribute more to the value of the

business than the old activities they replace.


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Record keeping requirement of tax provides business

payers with other benefits; Sandford et al (1981) argued that tax

compliance might encourage taxpayers to prepare accounts

internally and that in doing so, they would be saving on external

accountant fees and audit fees. Sandford, (1981) stated that

business taxpayers who keep quality records will, as a direct or

indirect consequence, save on their overall tax compliance

costs.

Evans, Carlon & Massey (2005) identified a second potential

source of cost savings in the form of a reduction in other

compliance costs. They will save directly because better records

will make tax compliance tasks easier and consequently less

costly. In 2005, professional accountants surveyed in Australia,

reported that good record keeping also gave SMEs better

access to credit and reduced their exposure to tax audit (Evans,

Carlon & Massey 2005).

Sandford et, al (1992), additional empirical evidence on

the perception of managerial benefits by business taxpayers is

available from research on tax compliance costs undertaken in


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New Zealand and Australia in the 1990s. Nearly 50 per cent

business owners surveyed in New Zealand in 1991 agreed that

their purchase records were better kept as a result of complying

with GST obligations, and 31 per cent said that there was useful

cash collected. Sandford et. al (1981) asserted that more

stringent record keeping might lead to improved stock control.

Cash flow benefit is another major benefit of tax

compliance in tax literature. It help companies derive monetary

benefits from interest savings or earnings due to timing of

advance tax installments and, the time interval between

withholding of taxes for employees or non-employees and

deposit of withheld taxes in the government treasury. Cash flow

benefits arises when income is not taxed and remitted at the

point at which it is received, and taxpayers have the use of the

tax revenue for a period before the tax is paid to the tax authority

and the lawful delay in the remittance of tax revenues collected

by businesses on behalf of the government (e.g. PAYE or sales

tax). Sandford et al. (1981), the idea of cash flow benefits as an


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offsetting benefit of tax compliance to business taxpayers was

first popularized by Sandford and others in the early 1980s.

Tax deductibility benefits represent a transfer within the

economy, which does not reduce the social compliance costs.

Deductible expenses typically include fees paid to professional

tax advisers and these deductible expenses reduce taxpayers

tax liabilities. The benefits of the tax deductibility of compliance

activities to taxpayers were considered in some detail in an early

study by Johnston (1963). The income tax systems in most

developed countries recognize some tax compliance cost

activities as a source of legitimate tax deductible expenses.


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CHAPTER THREE

RESEARCH METHODOLOGY

3.0 INTRODUCTION

The objectives of this research is to determine perceptions

of small businesses in respect of the benefits of compliance and

to determine if small businesses are deriving any benefit as a

result of complying with their tax obligations. Research

methodology that express the ways that data will be obtained

and analysed including the hypothesis for this work is structured

into research design, sources of data and method of data

analysis

3.1 RESEARCH DESIGN

This is the framework of the study; it will guide the

researcher in the collection and analysis of data. Population of

study and Sample size of the study


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3.1.1 POPULATION OF THE STUDY

The population of the study is the group about whom the

researcher will be able to draw conclusion from since the

geographical location of this study is Benin City in Edo State, the

target population of this research study therefore is small

businesses with less than 20 employees operating in Benin City.

3.1.2 SAMPLE SIZE

The study has been restricted to the study of small businesses

operating in Benin City, Edo State. This is so because there are

no authoritative figures of the size and shape of this sector in

Nigeria. Also due to the large numerical number of small

business operating in Nigeria, few number of small business will

be used in the study during the research process. This is

because from their entire population, sample will be selected

which will in turn represent the entire population in order to give

room for manageability.

A sample of 200 small businesses will be selected using simple

random sampling for the research study. The process involves


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collecting the names of small business with registered

addresses operating in Benin City by moving from one street to

the other from their various signboards. This data is then

summed up and the samples are drawn using simple random

sampling (lottery method). Questionnaires are then administered

the sample drawn. A screening question was inserted in the

survey instrument would allow the identification of any business

with more than 20 employees.

3.2 SOURCES OF DATA

3.2.1 PRIMARY SOURCES OF DATA

The primary sources of data will involve mainly the

questionnaires personally administered by the researcher. The

questionnaire will be used to gather data on general matters

relating to the processes about tax compliance and tax benefits.

The questionnaire will be administered to the representative of

the selected small business.


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3.2.2 SECONDARY SOURCES OF DATA

There will also be the use of secondary data. Secondary data

are data which has been gathered by a different entity for their

own specific use. It was obtained from Edo State Revenue

Board.

3.3 METHOD OF DATA ANALYSIS

The data from the research is analysed using chi-square

and spearman rank correlation. Chi-square as a statistical tool

enables researchers to establish a relationship if there is any

between two categorical or nominal variables. Spearman rank

correlation defines the degree of relationship which exists

between two or more variables.

The data pertaining to the various hypotheses were

entered into Microsoft 2007 for analysis using the correlation

tool.


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3.4 LIMITATION OF THE STUDY

This study has some limitations which include: time,

finance, and the confidential nature of some individual as regard

their operations pose a major problem within my survey area.

These factors limited this research work.


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CHAPTER FOUR

PRESENTATION AND ANALYSIS OF DATA

4.0 Introduction

This chapter presents the description, analysis and

interpretation of the data obtained from the questionnaire used

for this study. The results are used to provide answers to the

research questions of the study.

4.1 Presentation of Result

Table 4.1: Distribution and Return of Questionnaire

Questionnaires Number Percentage

Distributed 200 100%

Returned 188 94%

Unreturned 12 6%

Source: Researchers field work

In course of this research, two hundred questionnaires

were administered to organizations drawn from the population.

One hundred and eighty-eight were returned while twelve were


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not returned, this represent 94% and 6% of the distributed

questionnaires respectively.

4.1.1 DEMOGRAPHIC INFORMATION

Table 4.2: Sex Distribution of Respondents

Frequency Percent Valid PercentCumulative

Percent

Valid Male 163 86.7 86.7 86.7

Female 25 13.3 13.3 100.0

Total 188 100.0 100.0 Source: Researchers field work

Table 4.2 shows that respondents were male dominant. The

male sex accounted for 86.7% of the respondents while 13.3%

of the respondents were females.


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Table 4.3: Age Distribution of Respondents

Frequency Percent Valid Percent

Cumulative

Percent

Valid Under 30 yrs 38 20.2 20.2 20.2

30-39yrs 125 66.5 66.5 86.7

40-49yrs 25 13.3 13.3 100.0


Table 4.3 shows 125 respondents were within age bracket 30

39 years of age and this accounted for 65.5% of the returned

questionnaires while 38 respondents (20.2%) were under 30

years of age. Also 25 respondents were within the age bracket

of 40 49 years of age.

Table 4.4: Educational Qualification of Respondents


Cumulative

Percent

Valid Primary 13 6.9 6.9 6.9

SSCE/GCE/WAEC 25 13.3 13.3 20.2

NCE/OND 50 26.6 26.6 46.8

B.Sc/HND 75 39.9 39.9 86.7

Others 25 13.3 13.3 100.0



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Table 4.6: Distribution of registered business tax payers

QuestionResponse Percentage

Yes No Yes No

Is your company registered for tax? 63 125 33.51% 66.49%

Do you regularly pay your tax? 175 nil 93.1%


In Table 4.6, 63 businesses are registered to pay tax and

125 businesses are not registered to pay tax. This value

translates 33.51% and 66.49% respectively. Also 175

respondents indicated their businesses pay their tax regularly,

this account for 93.1% of the total returned questionnaires.

Table 4.7: Tax Obligation


Cumulative

Percent

Valid Income tax 175 93.1 93.1 93.1

PAYE 13 6.9 6.9 100.0


In Table 4.7, 175 businesses representing 93.1% pay Income

Tax while 13 businesses representing 6.9% is saddle with Pay


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4.1.3 RESEARCH QUESTION

Research Question 1: What positive relationship exists

between tax compliance by an organization and improvement in

its accounting information system?

Table 4.8: Tax compliance and improvement of accountinginformation system

Tax Compliance andAccounting InformationSystem

1 2 3 4 5 mean

1 Complying with taxobligations has help toimprove my accountinginformation system

13 12 38 87 13 163 3.46

2 Complying with recordkeeping task of tax

compliance has helped ourbusiness to developAccounting InformationSystem

13 50 0 38 87 188 3.72

3 Tax compliance obligationshave enabled myorganization to acquirecomputerized accountingsystem

25 38 12 100 13 188 3.20

4 Acquisition ofcomputerized accountingsystem has improved ourAccounting InformationSystem

50 13 0 25 100 188 3.60



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Table 4.8 show the benefit of tax compliance in terms of

improvement in accounting information system of small business

taxpayers. All the items in the table were accepted by the

decision mean range of 3.00 and above. All the items in the

table have mean value greater than 3.00. In item 1, 100

businesses agreed that complying with tax obligations has

helped to improve their accounting information system while 25

disagreed. To items 2, 3 and 4 a close observation revealed

125, 113 and 125 respondents agreed respectively while 63

each disagreed. There was a general improvement in

accounting information following tax compliance by businesses.


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between tax compliance by an organization and improvement to

its internal controls?

Table 4.9: Tax compliance and improvement of internalcontrol

Tax compliance andimprovement in internalcontrol

1 2 3 4 5 Mean

1 Complying with taxobligations has help toimprove my businessinternal controls

12 38 25 38 75 188 3.67

2 Tax complianceencourages taxpayers toprepare their accountsinternally.

13 75 0 87 13 188 3.06

3 Our internal control haveimproved with adoption ofour tax AccountingInformation System

12 13 12 38 113 188 4.21

4 Record keeping task of taxcompliance lead toimproved stock control.

12 63 13 75 25 188 3.20

5 Improved internal control in

our business has improvedour inventory management

25 25 0 125 13 188 3.40

6 Improved internal control inour business has improvedour cash flow monitoring.

12 25 25 113 13 188 3.48



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In Table 4.9, all the items has a mean value greater than

3.00 and respondents all indicated that tax compliance results in

improvement in internal control of businesses.


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Research Question 3: What positive relationship existsbetween tax compliance by an organization and saving in costs?

Table 4.10: Benefits of tax compliance in terms of savingsin cost

Tax compliance andsaving in cost.

1 2 3 4 5 mean

1 Complying with taxobligations has help toincrease my cash flow from

taxes and reduce tax cost

0 13 25 63 87 188 4.19

2 Book keeping requirementof Tax compliance reducescost on accountants andaudit fee

63 25 0 63 37 188 2.93

3 Tax compliance minimizesoperating cost

0 50 13 50 75 188 3.80

4 Tax compliance enabled our

organization to prepare ouraccount internally.

0 13 13 75 87 188 4.26

5 Record keeping task of taxcompliance had stopped ourbusiness from hiringexternal accountant.

13 13 25 12 125 188 4.19

6 Record keeping task of taxcompliance have lead tosavings on accountant time.

13 0 13 75 87 188 4.19


In Table 4.10, item 2 have a mean value of 2.93 which is less

than the decision mean value of 3.00. It reveals that

respondents did not accept that accept that book keeping


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requirement of tax compliance reduces cost on accountant and

audit fee. All other items in the table have mean value greater

than 3.00


between tax compliance by an organization and its business

performance via improved accounting information?

Table 4.11: Tax Compliance and business performance

Tax compliance andbusiness performance

1 2 3 4 5 Mean

1 Complying with taxobligations has help toimprove the knowledgeof my business financialposition

12 63 0 63 50 188 3.40

2 Complying with taxobligations has help toimprove my knowledgeof business profitability

38 38 25 87 0 188 2.86

3 Complying with taxobligations has help toimprove creditmanagement in mybusiness

13 25 25 100 25 188 3.53



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Table 4.11 captures the responses of respondent on

business performance resulting from improved accounting

system. Respondents response in term item 2 has a mean

value less than 3.00 while items 1 and 3 have a mean value

greater than 3.00. Respondents agreed to that complying with

tax obligations has helped to improve the knowledge of business

financial position and improve credit management.

4.2 Data Analysis

4.2.1 Hypotheses Testing

Data used for analysis in testing the various hypotheses

was obtained from Table 4.8, 4.9, 4.10 and 4.11 respectively.

The strongly disagree and disagree were summed up and taken

as disagreed while strongly agree and agree were summed up

as agreed. Undecided were taken as a unity


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Hypothesis 1:


an organization and improvement in its accounting information

system.

Agree Disagree Undecided No response Total

1 100 (115.75) 25 (53.5) 38 (12.5) 25 (6.25) 188

2 125 (115.75) 63 (53.5) 0 (12.5) 0 (6.25) 188

3 113 (115.75) 63 (53.5) 12 (12.5) 0 (6.25) 188

4 125 (115.75) 63 (53.5) 0 (12.5) 0 (6.25) 188

Total 463 214 50 25 752

Expected values in bracket

X2 = _(o-e)2 / e

X2 = 175.9698

X2tabulated = 16.92; df = 9, P=0.05.

We reject the null hypothesis at 0.05 level of significance

and accept the alternative hypothesis that there is a positive


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Hypothesis 2,


an organization and improvement to its internal controls.

Agree Disagree Undecided Total

1 113 (121.3) 50 (54.17) 25 (12.5) 188

2 100 (121.3) 88 (54.17) 0 (12.5) 188

3 151 (121.3) 25 (54.17) 12 (12.5) 188

4 100 (121.3) 75 (54.17) 13 (12.5) 188

5 138 (121.3) 50 (54.17) 0 (12.5) 188

6 126 (121.3) 37 (54.17) 25 (12.5) 188

Total 728 325 75 752

X2 = _(o-e)2 / e

X2cal = 118.77

X2tabulated = 18.31; df = 10, P=0.05.

We reject the null hypothesis at 5% level of significance as X2cal

is greater than X2tabulated and then accept the alternative

hypothesis that there is a positive relationship between tax


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compliance by an organization and improvement to its internal

controls.

Correlation Co-efficient Analysis of Table 4.9

BizI.C InternalAcct AIS Stockcontrol InventoryMangt. cashflowBizI.C 1.00InternalAcct 0.38 1.00AIS 0.72 0.77 1.00Stockcontrol 0.40 0.96 0.82 1.00InventoryMangt. 0.78 0.73 0.90 0.76 1.00cashflow 0.69 0.80 0.94 0.83 0.93 1.00

There is positive relationship with between tax compliance

by an organization and improvement to its internal controls.


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Hypothesis 3:

H0: There no positive relationship between tax compliance by an

organization and saving in costs.

Agree Disagree Undecided Total

1 150 (139.33) 13 (33.83) 25 (14.83) 188

2 100 (139.33) 88 (33.83) 0 (14.83) 188

3 125 (139.33) 50 (33.83) 13 (14.83) 188

4 162 (139.33) 13 (33.83) 13 (14.83) 188

5 137 (139.33) 26 (33.83) 25 (14.83) 188

6 162 (139.33) 13 (33.83) 13 (14.83) 188

Total 836 203 89 752

X2 = _(o-e)2 / e

X2 = 185.0019

X2tabulated = 18.31; df = 10, P=0.05.

We reject the null hypothesis at 0.05 level of significance

and accept the alternative hypothesis that there is a positive


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relationship between tax compliance by an organization and

savings in cost.


reducetaxcost accountant&auditfee operatingcost Int.acct Ext.accountant accountanttime

reducetaxcost 1.00accountant&auditfee 0.83 1.00operatingcost 0.88 0.90 1.00internalacct 0.96 0.79 0.82 1.00externalaccountant 0.89 0.74 0.88 0.87 1.00accountanttime 0.94 0.72 0.77 0.99 0.87 1.00

There is positive relationship between tax compliance by an

organization and saving in cost.


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BizFin.Position Bizprofitability creditmangt

BizFin.Position 1.00Bizprofitability 0.93 1.00creditmanagement 0.85 0.87 1.00

There is a positive relationship between tax compliance by

an organization and its business performance via improved

accounting information system. Complying with tax obligations

has help to improve my knowledge of business profitability and

complying with tax obligations has help to improve credit

management in my business

4.3 RESEARCH FINDINGS

From the 175 respondents that pay their tax regularly, 100

respondents indicated that complying with tax obligations has

help to improve their accounting information system, 125

indicated that complying with record keeping task of tax

compliance has helped their business to develop Accounting


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Information System, 113 indicated Tax compliance obligations

have enabled their organization to acquire computerized

accounting system

And 125 respondents indicated acquisition of computerized

accounting system has improved their Accounting Information

System. This is evident in the positive mean value of these

questions.

The questions that continued hypothesis two, 113

respondents indicated that complying with tax obligations has

help to improve their business internal controls, 100 respondents

indicated that Tax compliance encourages taxpayers to prepare

their accounts internally, 151 respondents indicated that their

internal control have improved with adoption of our tax

Accounting Information System, 100 respondents indicated

Record keeping task of tax compliance lead to improved stock

control, 138 respondents indicated improved internal control in

their business has improved their inventory management and

126 respondents indicated that improved internal control in their

business has improved their cash flow monitoring.


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The respondents all identified improvements to record

keeping system via Accounting Information System,

improvements to cash flow monitoring, improvements to stock

control, improvements to credit management, savings on

accountant costs and better knowledge of financial affairs as

benefits of tax compliance. The result of this research is in

concord with result previous researches on benefits of tax

compliance in small businesses such as Lignier (2009), he

concluded in his work that large majority of small business

taxpayers believed that, as a result of tax compliance

requirements their record keeping had improved, and that they

had a better knowledge of their financial affairs.


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CHAPTER FIVE

SUMMARY OF FINDING, CONCLUSION AND

RECOMMENDATIONS

5.0 INTRODUCTION

The chapter synthesizes the preceding four chapters and

concludes the project. Discussion is structured into summary of

the findings, conclusion and recommendation.

5.1 FINDINGS AND DISCUSSION

The thrust of this study is benefits of tax compliance to

small business taxpayers in Nigeria. To undertake the study, this

work was structured into five chapters; chapter one articulated

the study background, statement of research problem, research

questions, objectives of the research, research hypothesis,

scope, and significance of study. Chapter two reviewed relevant

literatures while Chapter three presented the research

methodology and Chapter four presented the results obtained

from the study.


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This study has five objectives; to determine positive

relationship between tax compliance by an organization and

improvement in its accounting information system, to determine

the positive relationship between tax compliance by an

organization and improvement to its internal controls, to

ascertain whether there is positive relationship between tax

compliance by an organization and saving in costs, and to

determine positive relationship between tax compliance by an

organization and its business performance via improved

accounting information.

Sandfords prediction in the past that GST in Australia or

VAT, its British equivalent was likely to generate significant

managerial benefits for small businesses, because it compels

owner-managers to keep detailed and up-to-date records of their

transactions is also true from the result of this research. It was

observed that tax benefits occur because the more stringent

record keeping practices imposed by tax compliance obligations

will lead to a better knowledge of financial affairs by business

taxpayers; therefore a better knowledge of financial affairs


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appeared to be associated with compliance with tax

requirements.

It was observed that the use of computers and the

increased level of AIS sophistication brought about by tax

compliance would lead to an improvement in the variety and the

quality of the information produced by these systems. The result

shows that record keeping requirement of tax compliance has

resulted in improved accounting information system of small

business taxpayers. This observation is in line with the assertion

of Lignier (2009); managerial benefits may be derived by

business taxpayers as a result of record keeping requirements

imposed by tax compliance obligations.

From the research it was observed that tax compliance

has resulted in improved information system, internal control,

cost saving and there is positive relationship between tax

compliance of small businesses and its improvement in its

accounting information system, internal controls, saving in costs

and business performance via improved accounting information.


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5.2 CONCLUSION

There is an extensive debate concerning benefits of tax

compliance by small business taxpayers. It was gathered that

recording keeping is a basic requirement of tax compliance and

this requirement have improved the Accounting Information

System and internal control mechanism of small businesses. In

literature it has been asserted that businesses that have to keep

records for taxation purposes generally have a greater report

output than businesses with no tax obligations. This would

indicate that while most businesses maintain core accounting

functions to allow the monitoring of key business indicators, the

system often remains very informal in the absence of tax

imposed record keeping requirements.

5.3 RECOMMENDATION

Based on the research findings, I therefore recommend

that the following factor should be taken into consideration;


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i. Record keeping activities should be intensity in small

businesses as this will improve their accounting system

and internal control.

ii. Tax compliance obligation of recording keeping should be

made everyone affair to adequately reap the benefits of

stock management, improved credit management, and

saving in cost.

iii. Small businesses should registered with tax authorities to

able to subject their business to various tax obligations

and hence reap its benefits

5.4 FUTURE RESEARCH

Future research could proceed in a number of directions.

First, more extensive studies are needed to cover a wider cross-

section of small businesses across businesses in Nigeria. Such

a large scale study will produce data on benefits of tax

compliance by small business taxpayers. Second, tax benefits to

small business have not been studied in Nigeria; therefore, the

forms of tax benefits require further attention.


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REFERENCES

Allingham, M. G. and Sandmo, A. (1972) Income Tax Evasion:A Theoretical Analysis, Journal of Public Economics, 1:323-38.

Armington, C. and Marjorie, O., (1982) Small Business HowMany Jobs? Brookings Review. I-1, pg 14-17.

Beyene, A. (2002); Enhancing the Competitiveness andProductivity of Small and Medium Scale EnterprisesSMEs in Africa: An Analysis of Differential Roles of

National Governments Through Improved SupportServices. Africa Development Vol. XXVII

Birch, D. L., (1979), The Job Generation Process. M.I.T.Program on Neighborhood and Regional Change:Cambridge, MA.

Boockholdt, J. (1999), Accounting Information SystemsTransaction Processing and Control. New York, The Mac-

Graw-Hill companies

Brown, D. (1985) Business Ethics: Is Small Better?, PolicyStudies Journal, 13(4): 766-75.

Cunningham J. B. and Lischeron, J. (1991) DefiningEntrepreneruship, Journal of Small BusinessManagement, 29(1).

Hall, C., (2007), When the Dragon Awakes: Internationalization

of SMEs in China and Implications for Europe, CESifoForum, Vol. 8, No. 2, pp.29-34.

Jackson, B., and Milliron, V., (1986) Tax Compliance Research:Findings, Problems, and Prospects Journal of AccountingLiterature, 5: 125.

Johnston, K. S.,(1963), Corporations Federal Income TaxCompliance Costs: A Study of Small, Medium-size, and


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Large Corporations. Bureau of Business ResearchMonograph No. 110. Columbus: Ohio State University.

Nicolaou, A., (2000) A Contingency Model of PerceivedEffectiveness in Accounting Information Systems:Organizational Coordination and Control Effects.International Journal of Accounting Information Systems,Vol. 1, pp. 91-105

Richardson, M., and Sawyer, A., (2001) A Taxonomy of the TaxCompliance Literature: Further Findings, Problems andProspects 16 Australian Tax Forum 137.

Roberts, M., and Wood, M., (2001), The Strategic Use ofComputerised Information Systems by a Mico Enterprise.15(1/2) Logistics Information Management 115.

Roth, J., Scholz J. and Witte, A., (1989) Taxpayer Compliance:An Agenda for Research pg 21.

Sandford, C. (ed.), (1995) Taxation Compliance Costs:Measurement and Policy, Fiscal Publications, Bath.

Sandford, C., and Hasseldine, J., (1992) The Compliance Costsof Business Taxes in New Zealand. Institute of PolicyStudies, 96-97.

Sandford, C., Godwin, M., and Hardwick, P., (1989)Administrative and Compliance Costs of Taxation. FiscalPublications, 118.

Sandford, C., Godwin, M., Hardwick, P., and Butterworth, M.,

(1981) Costs & Benefits of VAT. Heinemann, 94.

Sandford, C., Michael G., Peter H., and Butterworth, M. I. (1981)Costs and Benefits of VAT. London: Heinemann

Tran-Nam, B., and Glover, J. (2004) The GST recurrentcompliance costs/ benefits of small business in Australia:A case study approach, 10(4) New Zealand Journal ofTaxation Law and Policy, 344.


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DEPARTMENT OF ACCOUNTING

FACULTY OF MANAGEMENT SCIENCESUNIVERSITY OF BENIN

BENIN CITY

Dear Respondents,

I am a final year student of Department of Accounting of the University of

Benin. I am conducting a research investigation on benefits of tax

compliance to small business tax payer. Please, assist me to fill this

attached questionnaire. Any information supplied by you will be treated with

utmost confidentiality and will be used for the stated academic purpose only.

Thank you.


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DEPARTMENT OF ACCOUNTINGFACULTY OF MANAGEMENT SCIENCES

UNIVERSITY OF BENINBENIN CITY

QUESTIONNAIRE ON BENEFITS OF TAX COMPLIANCE TO SMALL

BUSINESS TAX PAYER.

Small businesses are subject to numerous regulations such as tax

obligation which they are expected to fulfill; meeting these various tax

obligations constitutes Tax compliance. Business taxpayers derived

benefits imposed by tax compliance activities and these benefits include

managerial benefits in the form of improved financial information and

improved managerial decision making, cash flow benefits and deductibility

benefits.

INSTRUCTION: Read the questionnaire carefully, and tick ( ) your choices

of answer appropriately; where necessary give other relevant information.

Part A: Background information

1. Sex: Female ( ) Male ( )

2. Age: under 30 ( ) 30-99 ( ) 40-49 ( )

50-59 ( ) 60 or over ( )

3. Educational Qualification: Primary ( )

SSCE/GCE/WAEC ( ) NCEOND ( ) B.Sc/HND ( )

Other (please

state):___________________________

4. How old is this business? 1-2 years ( ) 3- 5 years ( )

6-10 years ( ) More than 10 years and up to

20 years ( )

5. This business is run as a: ( ) Sole proprietor ( )

Partnership ( ) Company ( ) Trust ( ) Multiple

legal entities (e.g. a company and a trust, or several companies)

6. Is your company registered for tax? Yes ( ) No ( )


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7. Do you regularly pay your tax? Yes ( ) No ( )

8. Please indicate the tax obligations of your business? Income

Tax ( ) Pay As You Earn (PAYE) ( ) VAT ( )

Others____________________

Part B:

Below is a list of statement about benefits of tax compliance to small

businesses. Please use the scale below to answer the following questions

ticking the appropriate box.

Strongly Disagree = 1Disagree = 2Neither agree nor disagree = 3Agree = 4Strongly Agree = 5

1 2 3 4 5

1. Complying with tax obligations has benefits thatcompensate some of the tax costs

2. Complying with tax obligations has help toimprove my business record keeping

3. Complying with tax obligations has help toimprove the knowledge of my business financialposition

4. Complying with tax obligations has help toimprove my knowledge of business profitability

5. Complying with tax obligations has help toincrease my cash flow from taxes and reducetax cost

6. Complying with tax obligations has help toimprove my accounting information system

7. Complying with tax obligations has help toimprove my business internal controls

8. Complying with tax obligations has help toimprove credit management in my business

9. Complying with tax obligations has help to

improve my stock control (inventory)


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ACCOUNTING INFORMATION SYSTEM

10.

Complying with record keeping task of taxcompliance has helped our business todevelop Accounting Information System

11.

Tax compliance obligations have enabled myorganization to acquire computerizedaccounting system

12.

Acquisition of computerized accounting systemhas improved our Accounting InformationSystemINTERNAL CONTROLS

13.

Tax compliance encourages taxpayers toprepare their accounts internally.

14.

Our internal control have improved withadoption of our tax Accounting InformationSystem

15.

Record keeping task of tax compliance lead toimproved stock control.

16.

Improved stock control in our business hasimproved our inventory management

17 Improved internal control in our business hasimproved our cash flow monitoring.SAVING IN COSTS

18. Book keeping requirement of Tax compliancereduces cost on accountants and audit fee19.

Tax compliance minimizes operating cost

20.

Tax compliance enabled our organization toprepare our account internally.

21.

Record keeping task of tax compliance hadstopped our business from hiring externalaccountant.

22 Record keeping task of tax compliance have

lead to savings on accountant time.

Thank you for your co-operation.

Documents

Project Paul