Analysis of Tax Compliance in Sub-Saharan Africa: Evidence from Firm-Level Study

Adamu Jibir; Musa Abdu; Tasiu Muhammad

doi:10.2478/erfin-2020-0007

Adamu Jibir Department of Economics, Gombe State University, Nigeria
Musa Abdu Department of Economics, Ankara Yıldırım Beyazıt University, Turkey
Tasiu Muhammad Department of Economics, Ahmadu Bello University, Nigeria

DOI: https://doi.org/10.2478/erfin-2020-0007

Keywords: Competition, Corruption, Power, Trust, Tax-compliance

Abstract

This study analyses tax compliance among firms in Sub-Saharan Africa (SSA) within an extended Slippery Slope Framework (eSSF). It applies instrumental variables and generalized estimating equations models on a constructed World Bank's Enterprise Survey longitudinal dataset. The results indicate that the perceived power of the tax authorities does not influence firms' tax compliance, which could be linked to corruption in the form of informal payment. The results also show that corruption encourages the culture of tax non-compliance among firms in SSA because the defaulting firms bribe tax authorities in order to avoid paying taxes and being punished for that. In addition, the results demonstrate that the perceived trust of tax authorities (state representatives) is vitally important in encouraging tax compliance among firms in SSA. In terms of political decisions, it may be implied that gaining trust of taxpayers should be pursued.

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