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Effect of Tax Amnesty Programmes on Tax Compliance in Nigeria

Abstract

Tax compliance remains one of the most significant challenges confronting tax administration in many developing economies, particularly Nigeria, where tax evasion, tax avoidance, a narrow tax base, and a large informal sector continue to undermine domestic revenue generation. Despite the introduction of various tax reforms aimed at improving tax administration and broadening the tax net, voluntary tax compliance among individuals and corporate taxpayers remains relatively low. In response to these challenges, the Federal Government of Nigeria has implemented several tax amnesty programmes, most notably the Voluntary Assets and Income Declaration Scheme (VAIDS) and the Voluntary Offshore Assets Regularization Scheme (VOARS), to encourage taxpayers to voluntarily disclose previously undeclared income and assets, regularize their tax status, and settle outstanding tax liabilities without facing severe penalties or prosecution. These programmes were designed to increase tax compliance, expand the tax base, improve government revenue, enhance taxpayer awareness, and strengthen confidence in the tax system. Tax amnesty programmes provide taxpayers with an opportunity to correct past non-compliance by offering temporary relief from penalties, interest charges, and legal sanctions, while enabling tax authorities to recover unpaid taxes and improve future compliance. However, concerns remain regarding the long-term effectiveness of tax amnesty initiatives, as critics argue that repeated amnesty programmes may encourage future non-compliance by creating expectations of additional amnesties. Furthermore, issues such as inadequate public awareness, limited trust in tax authorities, weak enforcement mechanisms, and administrative inefficiencies continue to influence the success of tax amnesty programmes in Nigeria. Against this background, this study investigates the effect of tax amnesty programmes on tax compliance in Nigeria.The study is anchored on the Economic Deterrence Theory, the Theory of Planned Behavior (TPB), and the Fiscal Exchange Theory. Economic Deterrence Theory posits that taxpayers' compliance decisions are influenced by the perceived probability of tax audits, detection, and penalties for non-compliance. The Theory of Planned Behavior explains that taxpayers' attitudes toward taxation, subjective norms, and perceived behavioural control significantly influence their willingness to comply voluntarily with tax obligations. Fiscal Exchange Theory argues that taxpayers are more willing to comply when they perceive that government utilizes tax revenue efficiently to provide public goods and services. Together, these theoretical perspectives provide a comprehensive explanation of how tax amnesty programmes influence taxpayers' compliance behaviour and attitudes toward the tax system.The study adopts a quantitative research design using a structured questionnaire administered to registered taxpayers, tax consultants, accountants, finance managers, business owners, tax practitioners, and officials of the Federal Inland Revenue Service (FIRS) and selected State Internal Revenue Services across Nigeria. A stratified random sampling technique will be employed to ensure adequate representation of respondents from different sectors of the economy, including manufacturing, commerce, financial services, agriculture, telecommunications, construction, and other service industries. Primary data collected from respondents will be analyzed using descriptive statistics to summarize respondents' demographic characteristics and perceptions regarding tax amnesty programmes and tax compliance. Structural Equation Modeling (SEM) will be employed to examine the effect of tax amnesty programmes on tax compliance. The measurement model will be evaluated using reliability and validity tests, including Cronbach's Alpha, Composite Reliability (CR), Average Variance Extracted (AVE), and Confirmatory Factor Analysis (CFA), to ensure the consistency and robustness of the research instrument. Additional diagnostic tests, including multicollinearity assessment, common method bias analysis, and model fit indices such as the Comparative Fit Index (CFI), Tucker-Lewis Index (TLI), Root Mean Square Error of Approximation (RMSEA), and Standardized Root Mean Square Residual (SRMR), will be conducted to validate the structural model and ensure the reliability of the empirical findings.The study anticipates that tax amnesty programmes will have a significant positive effect on tax compliance in Nigeria. The availability of tax amnesty initiatives is expected to encourage voluntary disclosure of previously undeclared income and assets, increase taxpayer registration, improve the accuracy of tax reporting, and enhance the timely payment of tax liabilities. Tax amnesty programmes are also anticipated to strengthen taxpayers' awareness of tax obligations, improve relationships between taxpayers and tax authorities, reduce outstanding tax arrears, and expand the national tax base. Furthermore, successful implementation of tax amnesty programmes is expected to improve revenue collection, reduce tax evasion, strengthen tax administration, and promote a culture of voluntary compliance. However, the study also recognizes that the long-term effectiveness of tax amnesty programmes depends on consistent post-amnesty enforcement, effective tax audits, transparent tax administration, public confidence in government, and sustained taxpayer education. Without these complementary measures, repeated tax amnesties may weaken compliance by encouraging strategic non-compliance among taxpayers who anticipate future amnesty opportunities.This study is expected to make significant theoretical and empirical contributions to the literature on taxation, public finance, accounting, and fiscal policy by providing robust evidence on the relationship between tax amnesty programmes and tax compliance in Nigeria. Unlike previous studies that focused primarily on tax reforms or revenue generation, this research specifically evaluates the effectiveness of tax amnesty initiatives as a policy instrument for improving voluntary tax compliance within the Nigerian tax system. The findings will provide valuable insights for the Federal Inland Revenue Service (FIRS), State Internal Revenue Services, the Federal Ministry of Finance, policymakers, tax administrators, professional accounting bodies, tax consultants, business associations, development partners, and researchers regarding the effectiveness of tax amnesty programmes in promoting sustainable tax compliance. The study will also provide evidence-based recommendations for strengthening tax amnesty implementation, improving taxpayer education, enhancing regulatory enforcement, expanding digital tax administration, promoting transparency and accountability in tax administration, and developing long-term strategies for increasing voluntary tax compliance and sustainable domestic revenue mobilization in Nigeria.

Keywords: Tax amnesty programmes, tax compliance, voluntary disclosure, tax administration, tax evasion, domestic revenue generation, fiscal policy, Structural Equation Modeling (SEM).