Building a Social Contract? Understanding Tax Morale in Nigeria

Figures & data

Table 1. Key explanatory variables

Explanatory category/variable	Description
Neoclassical
Penalty when getting caught for not paying taxes (perception)	Perception of the size of penalty that a person would have to pay if they were caught: range from ‘ nothing’ to ‘ a heavy penalty.’
Difficulty of avoiding paying income or property taxes	Perception of how easy or difficult it is to avoid paying income or property taxes: range from ‘ Very easy’ to ‘ Very difficult.’
Lightness of tax burden	Perception of how light the tax burden is: range from not paying tax to ‘ a very significant burden’ .
Information and knowledge
Ease of finding out what taxes and fees should be paid to the government	Perception with range from ‘ Very easy’ to ‘ Very difficult’
Received communication from the government in the last year about what taxes to pay	Yes/no
Tax liability and payment
Required to pay personal income tax (PAYE) – awareness	Belief that you were liable for PAYE (Yes/no)
Paid some form of income tax last year	Whether you actually paid some form of income tax in the last year (Yes/no)
Required to pay property taxes – awareness	Belief that you were liable for Property tax (Yes/no)
Paid some form of property tax last year	Whether you actually paid some form of property tax in the last year (Yes/no)
Social and personal norms
Membership of religious group	Whether you are an active member of a religious group (yes/no)
Frequency Nigerians pay their tax (perception)	Perception of how frequently Nigerians pay their taxes (reversed scale of how often they avoid paying taxes with range: ‘ never’ to ‘ always’)
Community pay income tax	Whether community members actually pay full amount of income tax (‘ Never’ to ‘ Always’)
Community pay land us/property tax	Whether community members actually pay full amount of land use or property taxes (‘ Never’ to ‘ Always’)
Trust and Fairness
Do tax officials treat all ethnic groups the same?	Choice between ‘ treat all ethnic groups the same’ vs ‘ favour some ethnic groups over others’
Do tax officials treat all people from all religions the same?	Choice between ‘ treat people from all religions the same’ vs ‘ favour people from some religions over others’
Do tax officials treat all men and women the same?	Choice between ‘ treat all men and women the same’ vs ‘ favour one gender over the other’
Infrequency of tax officials taking a bribe	Perception of how infrequent it is for tax officials to ask for bribes (reversed scale of how frequently they ask from ‘ Never’ to ‘ Always’)
Trust in State tax officials to collect tax fairly*	Perception of how much people trust State tax officials: range from ‘don’t trust at all’ to ‘trust a lot’
General trust in government	Perception of how much people believe that government acts in the interest of all Nigerians vs acts in its own interests (sum of responses about trust in federal, state and local governments)
Approval of President Buhari	Approval of the President’ s performance: range from ‘ Strongly Disapprove’ to ‘ Strongly Approve’
Reciprosity and service delivery
Services satisfaction (index)	Average of satisfaction with six services (schools, health, local markets, roads, security, electricity) with range for each from ‘ Very dissatisfied’ to ‘ Very satisfied’
Quality of government services provided by state government compared to 3 year ago	Perception about governments services relative to three years ago: range is Worse, Same, Better.

*We look at trust in State tax officials because the main taxes imposed on individuals and households are levied by State governments.

Table 2. Pairwise correlation and OLS estimation results: descriptive model with just the controls

Variables	Pairwise Correlation	OLS	OLS (SE)
Urbanisation	0.0190*	0.035	(0.039)
Female	−0.0415*	−0.075*	(0.029)
Employed	−0.0152	−0.027	(0.029)
Age (<25)	−0.0274*	−0.060*	(0.028)
Age (25–31)	0.0069	0.013	(0.023)
Age (32–38)	−0.0019	−0.004	(0.027)
Age (39–44)	0.0179	0.053	(0.035)
Age (45–51)	0.0075	0.026	(0.042)
Age (52 above)	0.0059	0.023	(0.052)
English	0.0211*	0.047	(0.040)
Yoruba	−0.0588*	−0.144*	(0.044)
Igbo	−0.0143	−0.043	(0.061)
Hausa	0.0767*	0.146*	(0.041)
Other	−0.0487*	−0.112*	(0.052)
No formal schooling/ Informal schooling	0.0087	0.026	(0.053)
Some primary schooling/ Primary school	−0.0124	−0.035	(0.043)
Some secondary school/high school/ Se	−0.0277*	−0.050*	(0.026)
Ordinary National Diploma (OND)/ Nation	0.0297*	0.070*	(0.035)
Higher National Diploma (HND)/Some univ	0.0101	0.024	(0.035)
None	−0.0156	−0.035	(0.044)
Less than 20,000 NGN	−0.0503*	−0.094*	(0.032)
20,001–40,000NGN	0.004	0.008	(0.035)
Over 40,000 NGN	0.0748*	0.176*	(0.036)
None	−0.0234*	−0.438*	(0.167)
Christian	−0.0182	−0.033	(0.038)
Muslim	0.0216*	0.039	(0.038)
Traditional	0.0141	0.194	(0.190)
South East	−0.0072	−0.020	(0.063)
North East	0.0657*	0.176*	(0.055)
South South	−0.1160*	−0.286*	(0.055)
North Central	0.0681*	0.173*	(0.064)
South West	−0.0535*	−0.121*	(0.044)
North West	0.0459*	0.096*	(0.047)

For OLS estimations, robust standard errors clustered at the enumeration area in parentheses.

*p < 0.10.

Table 3. Pairwise correlation and OLS estimation results: baseline models. The results for control variables in OLS estimations are omitted in the table

Explanatory Variables	Pairwise Correlation	OLS	OLS (SE)
Penalty when getting caught for not paying taxes (perception)	0.1154*	0.119*	(0.017)
Difficulty of avoiding paying income or property taxes	0.0687*	0.100*	(0.019)
Lightness of tax burden	−0.0172	−0.035	(0.026)
Ease of finding out what taxes and fees should be paid to the government	0.0378*	0.012	(0.022)
Received communication from government in the last year about what taxes to pay	0.0492*	0.063	(0.046)
Required to pay personal income tax (PAYE) – awareness	0.0375*	0.012	(0.037)
Paid some form of income tax last year	0.0844*	0.187*	(0.039)
Required to pay land use or property taxes – awareness	0.0268*	0.004	(0.041)
Paid some form of property tax last year	0.0200*	0.035	(0.052)
Membership of religious group	0.0004	0.009	(0.033)
Frequency Nigerians pay their taxes	0.0970*	0.098*	(0.018)
Community pay income tax	0.0154	0.014	(0.014)
Community pay land use/property tax	0.0351*	0.029*	(0.016)
Do tax officials treat all ethnic groups the same?	−0.0965*	−0.189*	(0.040)
Do tax officials treat all people from all religions the same?	−0.1046*	−0.185*	(0.040)
Do tax officials treat all men and women the same?	−0.1016*	−0.179*	(0.040)
Infrequency of tax official taking a bribe	0.0325*	0.042*	(0.022)
Trust in State Tax Officials to collect tax revenue fairly	0.0438*	0.054*	(0.019)
General trust in government	0.0128	0.008	(0.015)
Approval of performance by President Buhari	0.0307*	0.005	(0.011)
Services Satisfaction	−0.0166	−0.018	(0.020)
Quality of government services provided by State Govnmt compared to 3 yrs ago	−0.0246*	−0.007	(0.022)

For OLS estimations, robust standard errors clustered at the enumeration area in parentheses.

*p < 0.10.

Table 4. Discriminatory tax treatment

Group	Percentage who believe that tax officials favour some groups over others	Tax morale
Language	Favour by ethnicity
English	31.54%	36.85%
Yoruba	16.86%	30.40%
Igbo	50.77%	33.29%
Other	23.77%	35.18%
Religion	Favour by religion
Christian	35.96%	35.04%
Muslim	20.22%	34.09%
Traditional	32.89%	49.20%
None	38.65%	14.78%
Gender	Favour by gender
Male	27.35%	36.21%
Female	30.01%	32.90%

Notes: Tax morale is the percentage of respondents in the group that disagree with the statement ‘I would not pay my taxes if I would not be caught.’

Table A1. Descriptive statistics of our main explanatory variables

Explanatory category/variable	Mean	STDV	Min	Max
Neoclassical
Penalty when getting caught for not paying taxes (perception)	1.04	0.94	0	3
Difficulty of avoiding paying income or property taxes	1.91	0.81	0	3
Lightness of tax burden	1.88	1.12	0	3
Information and knowledge
Ease of finding out what taxes and fees should be paid to the government	1.40	0.82	0	3
Received communication from the government in the last year about what taxes to pay	0.11	0.32	0	1
Tax liability and payment
Required to pay personal income tax (PAYE) – awareness	0.39	0.49	0	1
Paid some form of income tax last year	0.19	0.40	0	1
Required to pay property taxes – awareness	0.31	0.46	0	1
Paid some form of property tax last year	0.07	0.25	0	1
Social and personal norms
Membership of religious group	0.41	0.49	0	1
Frequency Nigerians pay their tax (perception)	1.57	0.96	0	3
Community pay income tax	2.52	1.22	0	4
Community pay land us/property tax	2.05	1.20	0	4
Trust and Fairness
Do tax officials treat all ethnic groups the same?	0.70	0.46	0	1
Do tax officials treat all people from all religions the same?	0.68	0.47	0	1
Do tax officials treat all men and women the same?	0.68	0.47	0	1
Infrequency of tax officials taking a bribe	2.17	0.96	0	3
Trust in Federal tax officials to collect tax fairly	0.85	0.86	0	3
General trust in government	0.83	1.15	0	3
Approval of President Buhari	1.44	1.49	0	4
Reciprosity and service delivery
Services satisfaction (index)	1.74	1.10	0	4
Quality of government services provided by State Government compared to 3 year ago	0.73	0.78	0	2

Table A2. Proportions of responses to the survey questions used in the analyses

	Proportion	Std. Err.
Penalty when getting caught for not paying taxes (perception)
Nothing	0.293	0.006
Small penalty	0.410	0.007
Medium penalty	0.210	0.006
Large penalty	0.087	0.004
Difficulty of avoiding paying income or property taxes
Very easy to avoid	0.072	0.004
Easy to avoid	0.207	0.006
Difficult to avoid	0.549	0.007
Very difficult to avoid	0.172	0.005
Lightness of tax burden
A very significant burden	0.166	0.005
A burden but not a major one	0.324	0.006
Not a significant burden	0.217	0.006
Doesn’t pay tax	0.293	0.006
Ease of finding out what taxes and fees should be paid to the government
Very difficult	0.073	0.004
Diffucult	0.476	0.007
Easy	0.353	0.007
Very Easy	0.098	0.004
Received communication from government in the last year about what taxes to pay
No	0.831	0.005
Yes	0.169	0.005
Required to pay personal income tax (PAYE) – awareness
No	0.553	0.007
Yes	0.447	0.007
Paid some form of income tax last year
No	0.736	0.006
Yes	0.264	0.006
Required to pay land use or property taxes – awareness
No	0.646	0.007
Yes	0.354	0.007
Paid some form of property tax last year
No	0.905	0.004
Yes	0.095	0.004
Membership of religious group
No	0.592	0.007
Yes	0.408	0.007
Frequency Nigerians pay their taxes
Never	0.163	0.005
Rarely	0.317	0.006
Often	0.374	0.007
Always	0.145	0.005
Community pay income tax
Never	0.070	0.003
Hardly	0.102	0.004
Sometimes	0.319	0.006
Most of the time	0.250	0.006
Always	0.258	0.006
Community pay land use/property tax
Never	0.113	0.004
Hardly	0.180	0.005
Sometimes	0.367	0.007
Most of the time	0.212	0.006
Always	0.129	0.005
Do tax officials treat all ethnic groups the same?
Do not treat the same	0.303	0.006
Treat the same	0.697	0.006
Do tax officials treat all people from all religions the same?
Do not treat the same	0.327	0.006
Treat the same	0.673	0.006
Do tax officials treat all men and women the same?
Do not treat the same	0.307	0.006
Treat the same	0.693	0.006
Infrequency of tax official taking a bribe
Always ask	0.067	0.003
Often ak	0.189	0.005
Occassionally ask	0.282	0.006
Never ask	0.463	0.007
Trust in State Tax Officials to collect tax revenue fairly
No trust at all	0.365	0.007
Trust a little	0.415	0.007
Trust somewhat	0.167	0.005
Trust a lot	0.053	0.003
General trust in government
No trust at all	0.525	0.007
Trust a little	0.148	0.005
Trust somewhat	0.136	0.005
Trust a lot	0.191	0.005
Approval of performance by President Buhari
Strongly disapprove	0.382	0.007
Somewhat disapprove	0.198	0.005
Neither approve nor disapprove	0.081	0.004
Somewhat approve	0.204	0.005
Strongly approve	0.135	0.005
Quality of government services provided by State Govnmt compared to 3 yrs ago
Worse than before	0.473	0.007
About same	0.334	0.006
Better than before	0.193	0.005