International Journal of Accounting and Taxation

Tax Compliance Costs of Small and Medium Scale Enterprises in Nigeria
Emmanuel Eragbhe, Kennedy Prince Modugu

Abstract
This study investigates the estimated cost of tax compliance for SMEs in Nigeria. The sum of internal compliance cost, external compliance cost and incidental cost; including bribery/psychological cost related to the different taxes paid by SMEs in Nigeria was utilized in estimating the tax compliance costs. Our analyses revealed that on the average the SMEs overall tax compliance cost in Nigeria is about N 108,594 per annum and the values range from N14, 500 to N725, 000 per annum. Smaller SMEs were found to have an average TCC of N219,601 per annum as against N123,047 TCC per annum for larger SMEs which implies the existence of tax compliance costs regressivity in Nigeria. It was also discovered that Value Added Tax (VAT) has the highest TCC accounting for about 33% of the total average tax compliance costs. Furthermore, the study shows that SMEs in manufacturing industry have the highest relative average tax compliance cost while those in business services have the lowest average tax compliance cost. Exporting SMEs in Nigeria bear higher tax compliance cost burden than non-exporting SMEs. We recommend tax compliance simplification and incentives that would assist in reducing SMEs tax compliance costs in Nigeria.

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