The Impact of tax audit and tax investigation on tax compliance of businesses (a case study of Lagos State, Nigeria)

Abstract

The purpose of the study was to examine the impact of tax audit and tax investigation on tax compliance of businesses using Lagos State as a case study. The specific objectives of the study were: to investigate the effect of tax audit on the tax compliance of businesses in Lagos state; to examine the impact of tax investigation on the tax compliance of businesses and to evaluate the inter-relational impact of tax audit and investigation on tax compliance on businesses in Lagos state. Quantitative research methodology was used as predestined by the purpose of this research. Secondary data were reviewed for the analysis. Descriptive statistics was employed for the data analysis, and ordinary least squares method was employed to provide answers to the research questions and test the hypotheses. Additionally, inter-relational impact of tax audit and tax investigation on tax compliance on businesses was examined using Pearson's correlation coefficient. A deductive research design was chosen. The findings showed that the degree of tax compliance of businesses in Lagos State has a positive correlated to tax audit and tax investigation. It was advised that tax authorities conduct annual tax audits and expand tax audits and investigations to cover more businesses, particularly those operating in the digital economy and informal sector, and provide constant professional training for tax auditors and investigators to equip them for the evolving changes in the industry. Continuous improvement in tax compliance of businesses through encouragement and enforcement will assist the government in generating more tax-related revenue.