Fiscal Incentives and Tax Compliance Behaviour in Industrial Clusters: A Survey of Clusters in South-east Nigeria

ABSTRACT

The study investigates the impact of fiscal incentives on the tax compliance behavior of firms in industrial clusters in Nigeria. Data from 800 firms drawn from three industrial clusters in South-East Nigeria were collected using a structured questionnaire through a multi-stage sampling procedure. Descriptive statistics and the logistic regression model were applied to estimate the survey responses. The major findings of the study show that regular tax audit, firm size, simplifying the communication on tax requirement, communicating deterrent messages, educational attainment of the firm owner and political legitimacy of the current government as well as fiscal incentives (tax credit, tax reduction, capital allowance, investment incentives) significantly influence the tax compliance behavior of firms in Nigeria’s industrial clusters. Similarly, the study finds that fiscal incentives significantly enhance firm performance in Nigeria’s industrial clusters. Implications and policy suggestions are presented for adoption by concerned stakeholders in the tax and industrial sectors.

KEYWORDS:

• Fiscal incentive
• tax compliance
• industrial cluster
• Nigeria

Acknowledgements

The authors appreciate the helpful comments from the participants at the Nigerian Tax Research Network Conference on the theme “Revenue challenges online and offline: Bridging the digital divide in an analogue economy” held in Abuja, Nigeria from 5^th – December 6, 2019. Also, the constructive comments from the editors and the reviewers which added value to the paper are gratefully acknowledged.

Disclosure statement

No potential conflict of interest was reported by the author(s).