Access to Credit Facilities and Tax Compliance among SMEs: Evidence from Nigeria

International Journal of Research and Innovation in Social Science (IJRISS) | Volume III, Issue III, March 2019 | ISSN 2454–6186

Access to Credit Facilities and Tax Compliance among SMEs: Evidence from Nigeria

Salawu, R.O., Adegbie, F. F., Oladejo, O.F.
Department of Accounting, Babcock University, Ilishan –Remo, Ogun State, Nigeria.

Abstract: – We investigate the impact of access to credit on tax compliance among SMEs in Nigeria. The need to generate revenue to meet up with the running of government activities has been a focus of every government across the globe, and SMEs are vital to revenue generation in emerging economies like Nigeria. We employ a survey of 400 SME operators in Nigeria. The findings reveal that there is a positive and significant relationship between access to credit and tax compliance (α=0.715, t(395)=15.637, p=0.000). The implication is that access to credit facilities contributes significantly to tax compliance among SMEs operators in Nigeria. The study concluded that access to credit facilities contributed significantly to tax compliance among SMEs operators in Nigeria. The study recommends that the Central Bank of Nigeria, Bank of Industry, Development Bank of Nigeria, Bank of Agric, Ministry of Finance and other government agencies involves in intervention fund should set up a technical committee that will monitor the disbursement and monitoring of intervention funds for SMEs so as to ensure that the SMEs operators access the fund and also to see that the fund is channeled for the purpose to which it was disbursed.

JEL Code: G21, H21, M13

Keywords: Tax Compliance, Small and Medium Scale Enterprises, Nigeria.

I. INTRODUCTION

Economic stimulation comes in diverse form as provision of infrastructures, employment creation, provision of tax incentives and favourable people friendly policies. In this study we focus on access to credit as a focal economic stimulation indicator. One way in which small scale businesses can generate higher revenue is through sustained access to credit facilities. When small scale businesses have access to credit, they can make profits and subsequently pay their tax from profit. Also, taxation is recognized as an important tool for national development and growth in most societies, and one of the major indices by which development and growth can be measured in any society is the amount of wealth, which is created by economic activities undertaking in that society (Aimurie, 2012). Payment of tax is a civic duty expected to be exercised by every liable citizen and companies so as to enable the government to meet up with its own responsibilities towards meeting the needs of the citizen and run the public utilities (Adebisi & Gbegi, 2013).

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