Taxpayers Ethical Behaviour on Faithful Presentation of Financial Statements and Timely Filing of Returns in Deposit Money Banks Listed in Nigeria

Taxpayers Ethical Behaviour on Faithful Presentation of Financial Statements and Timely Filing of Returns in Deposit Money Banks Listed in Nigeria

ADEGBIE Folajimi Festus, *ALEBIOSU Anthonia Opeyemi, OLAOYE Adebayo Samuel

Babcock University, Department of Accounting, Ilishan-Remo, Ogun State, Nigeria

*Correspondence Author

DOI: https://doi.org/10.51244/IJRSI.2023.1011017

Received: 08 November 2023; Accepted: 09 November 2023; Published: 05 December 2023

ABSTRACT

Taxpayers’ compliance with all relevant tax laws and regulations will enhance the revenue generation of the federal government. However, non-compliance with tax laws arises from the determination of taxpayers to reduce their tax liabilities through evasion or avoidance, incorrect completion of tax returns and failure to disclose the required information, which results into loss of income to the government. Studies have shown that tax authorities have not fully integrated taxpayer ethical behaviour as a motivating factor for tax compliance, therefore the study evaluated the effect of taxpayers’ ethical behaviour on faithful presentation in the financial statements and timely filing of returns of listed Deposit Money Banks in Nigeria.

The survey research design was adopted for this study. The population was 1606 officials of the selected banks. Cochran formular was used to select 403 staff. Random sampling technique was used to administer 403 questionnaires to the respondents. 374 copies were retrieved representing 94% retrieval rate. The Cronbach alpha reliability coefficients ranged from 0.720 to 0.820. Data were analysed using descriptive and inferential (multiple regression) statistics.

The result found that taxpayers’ ethical behaviour had significant effect on faithful presentation of financial statements (Adj. R²=0.659, F=146.86, p<0.25), Also, taxpayers’ ethical behaviour had significant effect on timely filing of tax returns ((Adj. R²=0.645, F=138.230, p<0.25). The study concluded that taxpayer ethical behaviour influenced the two variables in deposit money banks. The study recommended that tax authorities should ensure ethical tax behaviour are incorporated in their tax administration in Deposit money banks in Nigeria.

Keywords: Deposit money banks, Ethical tax behaviour, Faithful presentation, Tax authorities, Tax compliance, Tax evasion, Timely filing of tax returns

INTRODUCTION

Taxpayers’ compliance with all relevant tax laws and regulations will enhance the revenue generation of a local, state or federal government. Adequate revenue that accrues to the government from taxation will affect the economic development and the growth of the nation. Taxation is one of the most important ways governments collect funds to support her activities. Taxation is a key factor in every economy across the world. Taxes are essential to finance investments in human capital, infrastructure and the provision of services for citizens and businesses, as well as to set the right price incentives for sustainable private-sector investment. The level of taxpayers’ compliance is influenced by the utilization of tax revenues collected to provide amenities to the community. Vincent (2021) posited that taxpayers’ compliance is a major issue in tax management in any economy. Non-compliance with tax laws arises from the determination of taxpayers to reduce their tax liabilities through evasion or avoidance, incorrect completion of tax returns and failure to disclose the required information, which results into loss of income to the government. (Mohammed, Derashid & Ibrahim,2016). Taxpayers may be influenced not to pay taxes if there are variety of taxes imposed, ignorance of the tax laws, lack of transparency on the part of the tax authorities, ineffective and inefficient systems of collection by the taxpayers and inability to account for the taxes collected. (Mohammed, Derashi & Ibrahim 2016)

Inasious (2019) attributed tax compliance or willingness not to comply to rates imposed, system of tax audits, tax justice perception, the role of tax authorities, simplicity of rendering tax returns and tax administration capability. If the perception of the taxpayer is positive, government will get the revenue, but where it is negative, tax evasion will manifest, and becomes taxpayers’ practice. Compliance of taxpayers to tax laws and regulations has attracted the attention of tax authorities in developed countries because of the level of revenue generated through tax system. Countries like Germany, France, Italy, the United Kingdom, Japan, the United States, Canada, and Russia have reviewed their tax systems to ensure taxpayers compliance (Gberegbe & Umorenl,2017). International Centre for Tax and Development (2020) stated that globally,80% of total government revenue is from taxes and more than 50% in each country of the world. The centre analyzed that in 2019, total revenue and contribution rate reduced in 45 economies and increased in 51 economies. Abubakar and Christopher (2017) stated that in Organisation for Economic Cooperation and Development (OECD) countries, only Chile and Mexico are taxed less as a share of their GDP. Tax compliance is an ideal behavior for taxpayers to meet tax regulations and report accurately and honestly all their returns to the relevant tax authorities. The situation in Indonesia shows that the level of voluntary tax compliance to the community is very low, as reflected in their sub-optimal tax revenue recorded in their books. That is the ratio between the tax revenue to their Gross Domestic Product is low. (Jayawardane,2016). Hofman, Voracek, Bock and Kirchlet (2017) averred that challenge faced by tax authorities is that taxpayers are not easy to be forced to befit the rules of a tax system. Evidence from literature shows that tax evasion and avoidance are prevalent in developing countries unlike developed nations where taxpayers are captured in the tax net. (Abata,2014; Baldacchino, Potelli & Grima, 2019). Statistics show that in 2018, Nigeria recorded a deficiency of about N100billion due to non-compliance by contactors (Alasfour, Samy & Bampton, 2017).

Udezo and Onuora (2021) articulated that several reforms have been implemented in Nigeria in order to expand the tax, decrease the tax burden on taxpayers, restore taxpayer trust in the tax system and promote voluntary compliance. A number of these reforms have promoted tax compliance over time. Tax rates and tax administration come into play to ensure tax compliance. Filing is the submission of tax returns by taxpayers to the relevant tax authority according to the stipulated guidelines by the tax authorities according to the tax law. A company may file application for extension of filing returns for two months which approval is based on the discretion of the Federal Inland Revenue System. The use of automated systems has been found to introduce efficiency to business processes at a minimal cost. The bureaucratic structure of government which is costly to manage has led tax authorities as agent of government to introduce e-government led solutions like electronic tax filing, which enhances the delivery of services. However, the self-interest perspective to tax compliance has criticize the electronic model for been too narrow. (Batrancea, Nichita & Co, 2019). Non-compliance of taxpayers to relevant laws and policies have led to non-faithful representation of financial statements and untimely filing of tax returns by Deposit Money Banks in Nigeria. This has given the tax authorities a great concern. Despite the various reforms aimed at improving tax revenue generation through tax compliance, Nigeria has continued to experience unmitigated delinquency through widespread tax evasion and tax compliance. The reasons adduced by taxpayers is that the level and quality of infrastructural and social welfare services provided by governments in Nigeria do encourage voluntary compliance (Ndubuisi, Ezokwelume & Maduka, 2020). Consequently, these activities are considered as sabotage to the economy of Nigeria.

Alm, Bernasconi, Laury, Lee and Wallace (2017) posited that ethics consists of doctrine, value and codes of conduct that guide the comportment of a profession and the practitioners. Hence ethical behavior can be regarded as an individual perception and approach towards tax compliance and affect the attitude of taxpayers towards paying their tax liabilities. Some taxpayers believe in complying with tax laws to avoid cheating the government. Debarker, Heim, Tran and Yuskavage (2018) averred that individual with high ethical values about tax compliance appear to be more tax compliant, regardless of their tax status. Empirical evidence have proved that ethical tax behavior has a more effect on tax enforcement, trust in governance, power of authority, perception of accountability of tax authorities, perception of tax, tax morale, and perception of social ethical tax conduct (Guerra & Harrington, 2018; & Nichita, 2019)

In policy debates and academic discussion, the issue of non-compliance with taxation has continued to generate concerns. Due to its impact on government revenue, tax non-compliance cannot be overemphasized (Akhtar, Akhtar, John & Wong, 2017). The low level of tax revenue continues to characterize many countries in the world, particularly developing countries such as Nigeria. The aftermath of dwindling revenue due to tax non-compliance prevalence is the growing fiscal deficit and net public borrowing. The practice of tax non-compliance cut across different segment of the economy. Even though the tax non -compliance is more pronounced among individual and informal sectors because of the underground nature of their income sources, it has been argued that corporate entities are not exempted from the practice (Saad, 2014).

The concept of motivational positions seems to overlap theoretically with other widely studied attitudinal factors influencing the compliance behavior of taxpayers: tax morale, confidence, authority and justice, as well as attitudes to compliance costs and the competence needed to comply effectively. These connections are likely to emerge in addition to the expected links with the kinds of advice received from tax practitioners. Taxpayers’ concern for social duty or personal responsibility has been shown empirically to shape compliance. Some taxpayers pay taxes because they believe it is the right thing to do, irrespective of sanctions. Individual moral beliefs have been found to be highly significant in tax compliance decisions. Torgler (2005) concluded that tax morale has indeed emerged as one of the most consistent predictors of tax compliance. Tax morale is expected to be linked empirically to small business motivational postures, in particular, commitment.

The objectives of this study were to:

1. Investigate the effect of taxpayers’ ethical behaviour on faithful presentation in the financial statements of listed Deposit Money Banks in Nigeria
2. Explore the effect of taxpayers’ ethical behaviour on timely filing of tax returns in listed Deposit Money Banks in Nigeria;

Two hypotheses were tested in this study:

H₀1: Taxpayers’ ethical behaviour does not have significant effect on faithful presentation of financial statement in listed Deposit Money Banks in Nigeria.

H₀2: There is no significant effect of taxpayers’ ethical behaviour on timely filing of tax returns in listed Deposit Money Banks in Nigeria.

LITERATURE REVIEW/THEORETICAL FRAMEWORK

2.1 Conceptual Review

Faithful Presentation of Financial Statement

The faithful presentation of financial reports is characterized by their adherence to principles of truthfulness, freedom from error and completeness. Hence, reporting faithfully represented accounting information has ethical significance. (Mendoza, Wielhouwer, & Kirchler, 2017). Financial reports which are presented using both numerical and textual representations serve as a means of illustrating various economic occurrences. Given that meaningful financial reports are intended to depict significant occurrences, it is anticipated that they should accurately portray these economic phenomena without any compromise. International Accounting Standards Board (IASB, 2019), the accurate portrayal of a financial report can be determined by its comprehensiveness, impartiality, and absence of inaccuracies. A financial report is deemed complete when it accurately encompasses all the pertinent information that it is expected to include. Financial information refers to data that is derived from various transactions and operations conducted by an organization. The completeness of a financial report also encompasses the provision of detailed descriptions and explanations about crucial information pertaining to transactions and other events. The objectivity and fairness in the creation of financial reports are essential for ensuring a neutral depiction of financial information. Neutral financial information is characterized by the absence of bias or any sort of manipulation. The presence of an error-free representation of a financial report indicates that there are no mistakes or exclusions in the portrayal of economic phenomena.

According to Akinboade (2012), the term “financial statement” refers to a statement that provides management and interested external parties with a succinct overview of a business’s profitability and financial position. In alignment with the aforementioned definitions, it is customary to define a published financial statement as the audited annual report and accounts of an organization. This comprehensive document encompasses the balance sheet, profit and loss account, and cash flow statements, providing a concise overview of a firm’s operational outcomes and financial status for the specified period. The document is generated by the firm or organization and undergoes a thorough examination by the company’s external auditor(s), after which it is released to the public for access by any interested party. Based on the preceding discussion, it is imperative that the financial statements that are made publicly available should be free from any material misrepresentation or inaccuracies. This is crucial in order to ensure that all relevant stakeholders possess the necessary information to make well-informed decision.

Financial information is needed to predict, compare and evaluate a firm’s earning ability. It is also required to aid in economic decision-making investment and financing decision making. The financial information of an enterprise is contained in the financial statements. According to Fauziati, Minovia, Mulim, and Nasrai (2016), financial statements can be characterized as concise representations of financial information pertaining to the overall financial status of a company. According to Abata (2014), a financial statement may be described as a written document that provides a comprehensive overview of an organization’s financial position for a specified period. The financial statements encompass an income statement and balance sheet, which provide a comprehensive overview of resource inflows and outflows, profitability, and the allocation or retention of earnings. According to the Academic Dictionary of Organization, a financial statement is a formal record that presents the assets, income, expenses, and obligations of a firm, enabling a third party to evaluate the financial well-being of said company. According to Jemaiyo and Mutai (2016), financial statements are the principal means of reporting general-purpose financial information to users. There are several users – managers, investors, suppliers, customers, lenders, employee, government and the general public – who have vested interest in these financial statements (Akintoye &Tashe,2013; Debarker, Heim, Trau & Yuskavage,2018) The accounting data presented in the financial statements must be relevant and meaningful to the user (Olaoye & Ekundayo,2018). A model of the conceptual view as adopted from Abata (2014). Financial Statements have been widely defined in the extant literature by scholars and experts. According to the Companies and Allied Matters Act 1990 (CAMA) as amended in 2020, Financial statements are statement of accounts that present the fundamental accounts used to communicate quantitative financial information about a firm to shareholders, creditors, and other stakeholders interested in the financial status, operational outcomes, and funding sources of the reporting organization.

Timely Filing of Tax Returns

Inasious (2019) conceptually defined timely-filing of return as quick and speedy payment of taxes and accurate-recording of tax funds by an individual or tax agents or an organization. Ayube, Saad and Ariffin (2019) viewed timely filing of returns as accurate recording of tax fund payment by taxpayer and that in this world nothing can be said to be certain, except death and taxes. Literature have established that majority of organisations did not file a tax return over the years (Seidu, Abdul & Sebil, 2015). The act of not submitting a tax return is a significant issue that can have long-lasting repercussions. Regardless of whether an individual has an outstanding tax liability or is eligible for a tax rebate, there are adverse outcomes associated with the failure to file an income tax return (Deloitte, 2019). Based on the tax legislation in Nigeria, as outlined by Deloitte (2019), it has been observed that the penalty for late filing of Value Added Tax (VAT) returns has been increased to N50,000 for the initial month of non-compliance, followed by N25,000 for subsequent months of failure. Additionally, the penalty for failure to register for VAT has been raised to NGN 50,000 for the first month of default and NGN 25,000 for each subsequent month of default. Furthermore, the penalty for neglecting to notify the Federal Inland Revenue Service (FIRS) of a change in company address is set to be increased to N50,000 for the first month of default and N25,000 for each subsequent month of default. The aforementioned penalty also encompasses the failure to provide notification to the Federal Inland Revenue Service (FIRS) regarding the permanent cessation of trade or business activities. Therefore, this study defined timely filing of tax return income as the purported compliance, awareness, responsiveness, alertness, heedfulness, observance and cautiousness by taxpayer in acknowledging the payment of tax on its return to appropriate tax authorities.

2.2: Theoretical Framework

The concept of Social Contract Theory was formulated by three prominent philosophers of the modern era, namely Thomas Hobbes, John Locke, and Jean-Jacques Rousseau (Gauthier, 1977; Tienda, 2002). These prominent political philosophers have contributed significant ideas that have established the fundamental principles underlying contemporary democratic theory and practice. These thinkers concur that the establishment of the state and the implementation of civil rule are the outcome of a social contract entered into by the populace. According to Faber (2011), it can be inferred that the existence of the state and its leadership is contingent upon the collective consent of the people. The Social Contract Theory establishes a conceptual framework that envisions an ideal state in which the legitimacy of state authority and its leaders is derived from the consent of the populace. It offers a fundamental principle that elucidates the nature of human relationships and existence.

In accordance with the social contract hypothesis, individuals consent to the payment of taxes due to their appreciation of the benefits derived from such contributions. Taxation can be understood as a classical collective action dilemma, as it involves individuals relinquishing a portion of their personal wealth for the betterment of their fellow citizens. Hence, it is crucial to consider not just the association with the government but also the interaction among individuals as a significant factor influencing tax compliance (Br¨autigam, 2008; Levi, 1988; Schumpeter, 1991; Tilly, 1990). The theory goes on to say that a society can only exist if there are guarantees that the members will not cause harm to each other, and this is only possible if the members are able to rely on each other that they will keep the agreement. The Social Contract Theory urges that for morality to exist there must be rules in a society to govern behavior (Schumpeter, 1991).

Social contract theories have implications. The society has to form governments through contracts that every member of the society agrees to become party to. This is very vital for any society to survive (Locke, 2003). There must be the protection of lives and property hence the need for police forces in countries to enforce the law against murder, theft assault etc. (Social Contract theory). However, the police should not harm or intimidate civilians through orders of those in power. On the other hand, the individual should obey the law of the land so that there can be order in the society for them to pursue their needs (Social Contract theory). The social contract theories have laid the foundations for the political institutions in the society today by providing the notion of morals (Locke, 2003).

In his essay titled “Of the Original Contract,” David Hume (2011) put forward a comprehensive critique of the notion that individuals within a community have implicitly granted their agreement by virtue of benefiting from societal advantages. The speaker highlighted that a significant portion of the population fails to consider the matter at hand. However, even if individuals were to contemplate it, deriving pleasure from societal interactions cannot be seen as indicative of consent. Can it be asserted with legitimacy that a destitute peasant or craftsman possesses genuine agency in deciding to go from their homeland, given their lack of proficiency in foreign languages or customs, and their reliance on meager wages earned on a daily basis? It can be argued that an individual, by choosing to remain within a vessel, effectively grants consent to the authority of the master, even if they were initially brought on board while unconscious and face certain death upon leaving the vessel. Hume (2011) further challenges the validity of contract theory on various grounds, which have sparked considerable debate. Additionally, numerous other critiques have been raised against this theoretical framework. However, it is worth noting that Hume himself acknowledges that an immigrant who chooses to live in a country with full awareness of its government and laws might be seen as providing the “most genuine form of tacit consent.” In summary, it is not feasible to depend on implicit consent as a means of substantiating the unanimous agreement of all individuals within a particular community to the social compact. Nevertheless, individuals who choose to migrate and those who face no significant barriers to departure cannot invoke the same justification as Hume’s hypothetical “poor peasant”.

The Social Contract Theory proposed by John Locke has been subject to numerous criticisms throughout its development. Critics of his Social Contract Theory contend that his views exhibit incoherence, hypotheticality, unrealistic assumptions, and a lack of historical grounding (Laslett, 2013; Tate, 1965). Nevertheless, there exists a counterargument asserting that the tenets of Locke’s Social Contract Theory align with the principles of democracy, thereby offering a valuable framework for comprehending and evaluating the implementation of governance (Ritchie, 1891; Lloyd, 1901; Ellis, 2006; Hicky, 2011; Hampton, 1980; Abbott, 2008; Gherghe, 2011). According to Ward (2005), it may be inferred that John Locke played a pivotal role in the emergence of democratic principles. In other locations Laslett (2013) and Tate (1965) acknowledge that despite the numerous critiques and shortcomings connected with the social contract theory, scientists continue to employ it as an analytical framework in various research domains. This citation demonstrates that despite the criticisms levied against Social Contract Theory regarding its perceived absoluteness, it continues to maintain its appeal in both research and the realm of political activity (Locke, 2003).

The social contract theory is relevant to his study in that the theory is very important in the way it looks at society. The social contract theory can be seen in the various societies around the world. The social contract theories are used for the good of all in the society. The governments put in place should treat all human beings fairly and equally for example, fair trials and protection when they are taken to courts. The governments should practice democracy to ensure that the human rights and freedoms are given to the people. When this is done cases of human torture, illegal arrests, assassinations of crusaders of human rights by governments will reduce or be prevented altogether.

2.3 Empirical Review

Abata (2014) conducted a critical investigation to assess the extent to which corporate investors rely on published financial accounts. The findings indicate that a key obligation of management towards investors is to provide a standardized financial statement that has been assessed and validated by a certified auditor or financial specialist. Furthermore, the findings of this study indicate that investors possess a comprehensive understanding of financial statements prior to making investment choices. The findings of the investigation also revealed that investors place significant reliance on the reliability of auditors and financial experts when evaluating financial statements for investment purposes. Consequently, the publication of financial statements holds great importance in influencing investors’ decision-making processes. It is advised that a sufficient level of attention and thoroughness be used in the process of generating financial statements in order to prevent erroneous investment decisions that may result in financial losses and potential legal actions. In their study, Batrancea, Nichita, and Co (2014) conducted an investigation of the relationship between published financial statements and investment decisions among stakeholders of commercial banks in Nigeria.

The results of their investigation indicated a negative correlation between the balance sheet and investment decisions, whereas a positive correlation was observed between the income statement, notes on the account, cash flow statement, value added statement, and five-year financial summary and investment decision.

Their findings also demonstrated that the various components present in published financial statements were highly indicative of the ability to make sound investment decisions for stakeholders of commercial banks. Ndubuisi, Ezokwelwi and Maduka (2020) argue that financial statements hold significant importance within the framework of organizational operations and should be assessed within a broader context encompassing management, organizational, and environmental factors. Hence, the efficacy of financial reports is contingent not only upon the objectives of these systems but also upon the specific contextual aspects inherent to each firm. Financial statements are considered effective when the information they present adequately meets the needs of a broad range of users. Financial statements should be designed in a systematic manner to present information that can potentially impact the decision-making process of prospective investors on investments.

The empirical studies conducted by Jimenez and Iyer (2016) as well as Ayuba, Saad, and Ariffin (2019) focused on the link between tax compliance within a social context and the impact of social norms, trust in government, and perceived fairness on the compliance behavior of taxpayers. The survey revealed that taxpayers expressed agreement with the notion that social factors have an impact on tax compliance. This study further revealed that the influence of societal norms on compliance intentions is mediated indirectly by the process of internalization, resulting in the formation of personal norms. The augmentation of social norms favoring tax compliance directly corresponds to an elevation of personal norms about tax compliance, thus resulting in a subsequent upsurge in intents to comply with tax obligations. The study further revealed that the level of trust in the government plays a substantial role in shaping individuals’ perceptions of the fairness of the tax system, as well as their decisions regarding compliance. The research conducted by Ayuba, Saad, and Ariffin (2016) examined the moderating effect of perceived corruption on the marginal link between economic conditions and tax compliance. The findings of the study indicate that the perception of corruption has a major role in moderating the association between economic conditions and tax compliance, albeit to a limited extent. The empirical studies conducted by Jimenez and Iyer (2016) as well as Ayuba, Saad, and Ariffin (2019) focused on the link between tax compliance within a social context and the impact of social norms, trust in government, and perceived fairness on the compliance behavior of taxpayers. The survey revealed that taxpayers expressed agreement with the notion that social factors have an impact on tax compliance. This study further revealed that the influence of societal norms on compliance intentions is mediated indirectly by the process of internalization, resulting in the formation of personal norms. The augmentation of social norms favoring tax compliance directly corresponds to an elevation of personal norms about tax compliance, thus resulting in a subsequent upsurge in intents to comply with tax obligations. The study further revealed that the level of trust in the government plays a substantial role in shaping individuals’ perceptions of the fairness of the tax system, as well as their decisions regarding compliance. The research conducted by Ayuba, Saad, and Ariffin (2016) examined the moderating effect of perceived corruption on the marginal link between economic conditions and tax compliance. The study revealed that perceived corruption significantly moderated the relationship between economic factors and tax compliance marginally.

Empirical findings on social ethics tax behavior and tax compliance from previous studies (Alshira’h, Alsqour, Lutfi, Alsyouf & Alshirah, 2020; Bautigam, Fjeldstad, & Moore (2015). are mixed, unclear and scatted, thus limiting the consensus. Udezo and Unuorah (2021) conducted a research study to examine the influence of institutional factors, economic factors, individual factors, and social factors on tax compliance among self-employed individuals in Northern Ghana. The study employed a quantitative survey design and utilized a convenience sampling technique to collect primary data. The main data collection instrument employed was a questionnaire.

Alshira’h, Alsqour, Lutfi, Alsyouf and Alshirah (2020) worked on socio-economic model of sales tax compliance this work proposed the determinants of sales tax compliance in the context of small and medium-sized enterprises (SMEs) in Jordan, extending Fischer’s model of tax compliance, and adding the moderating role of tax knowledge and direct effect of tax service quality. This study proposed a model encapsulating the social, psychological and economic factors to provide insight into the sales tax compliance of Jordanian SMEs. This finding was re-investigated by Tilahun (2019) who conducted a study with the aim of identifying economic and social factors of tax compliance behavior in Bahir Dar city administration business income taxpayers. Voluntary compliance behavior of the taxpayers is affected by various factors and identifying these factors in order to maintain voluntary compliance at satisfactory.  Mehari and Abdulmajeeb (2017) empirically examined factors affecting voluntary compliance of taxpayers as well as combatting tax evasion: Evidence from comparing commercial and business tax registry. The study revealed that level of awareness of taxpayers, effectiveness and efficiency of tax authority, socio-cultural factors and political factors affect voluntary compliance of taxpayers. From the foregoing reviewed literature on taxpayers’ ethical tax behaviour dimensions and timely filing of tax returns, studies examined empirically the link between tax compliance in a social setting and the influence of social norms, trust in government, and perceived fairness on taxpayer compliance, how perceived corruption moderate the relationship between economic factors and tax compliance marginally, institutional factors, economic factors, individual factors and social factors drives tax compliance among self-employed in Northern Ghana, socio-economic model of sales tax compliance this work proposed the determinants of sales tax compliance in the context of small and medium-sized enterprises (SMEs) in Jordan, economic and social factors of tax compliance behavior, social frame and tax compliance modulate electrophysiological and autonomic responses following tax related decisions. From the foregoing reviewed literature on taxpayers’ ethical tax behavior and faithful presentation of financial statement, studies investigate the degree of reliance of the published financial statements by corporate investors and published financial statement as correlate of investment decision among commercial bank stakeholders in Nigeria. Thus, to the best of our knowledge there is fewer studies that have examined taxpayers’ ethical tax behaviour and faithful presentation of financial statement in Nigeria, hence the need for the study.

METHODOLOGY

The population consisted of The taxpayers included of 182 directors, including Executive Directors (EDs), Managing Directors (MDs), and Non-Executive Directors (NEDs), as well as 1, 424 top-level management staff, including Assistant General Managers (AGMs), Deputy General Managers (DGMs), and General Managers (GMs), from fourteen (14) listed commercial banks which are: Access Bank Plc, Eco Bank Transnational Incorporated, First Bank of Nigeria Holdings Plc, First City Monument Bank Group Plc, Fidelity Bank Plc, Guaranty Trust Bank Plc, Jaiz Bank Plc, Stanbic IBTC Holdings, Sterling Bank Plc, Union Bank Nigeria Plc, United Bank for Africa Plc, Unity Bank Plc, Wema Bank Plc and Zenith Bank Plc (National Bureau of Statistics, Nigeria report on numbers of banking Directors, 2020). The 14 banks have their headquarters in Lagos, the economic capital of Nigeria. The justification of selecting directors and top-level management employees is based on their years of experience, business expertise, and participation in management choices, all of which are deemed relevant characteristics for participating as respondents in this research. A firm’s board of directors is a vital organ that is not only responsible for management but also for implementing strong management innovation practices in the organization. The total population consisted of 1,606 taxpayers The Cronchran formula was used to select

n =

n = 

n =  

n =    

n = 310

In order to compensate for the non-response and for wrong filling of questionnaires, the sample of 310 was increased by 93, or 30% of the total sample which equal 403.A validated structured questionnaire was used to administer 403 copies to the respondents.378 copies were retrieved representing 94% retrieval rate. The Cronbach Alpha reliability coefficients ranged from 0.711 to 0.822.

Descriptive and inferential statistics (multiple regressions) were used to analyze the data.

The models formulated for the two hypotheses are:

FPFS = β₀ + β₁TM + β₂SEB + β₃TP + β₄TG + β₅PA+ εi ………………………….… Model 1

TFTR = β₀ + β₁TM + β₂SEB + β₃TP + β₄TG + β₅PA+ εi …………………………… Model 2

y_1a= Faithful Presentation of Financial Statement (FPFS)

y_1b= Timely Filing of Tax Returns (TFTR)

Taxpayer Ethical Tax Behaviour (TETB)

               x_1a = Tax Morale (TM)

               x_1b = Social Ethical Behaviour (SEB)

               x_1c = Taxpayer’s Perception (TP)

               x_1d = Trust in Governance (TG)

               x_1e = Power of Authority (PA)

DATA ANALYSIS, RESULTS AND DISCUSSION OF FINDINGS

4.1. Test of Hypothesis 1

Research Objective One: Investigate the effect of taxpayers ethical behaviour on faithful presentation in the financial statements of listed Deposit Money Banks in Nigeria

Research Question One: What is the effect of taxpayers’ ethical behaviour on faithful presentation in the financial statement of listed Deposit Money Banks in Nigeria?

Research Hypothesis One: Taxpayers’ ethical behaviour does not have significant effect on faithful presentation of financial statement in listed Deposit Money Banks in Nigeria

Table 4.1 Taxpayers Ethical Behaviour and Faithful Presentation

MODEL ONE
Variable	Coeff	Std. Err	T-Stat	Prob
Constant	.182	.183	.990	.323
TM	.294	.061	4.782	.000
SEB	.099	.052	1.928	.055
TP	.094	.057	1.645	.101
TG	.281	.062	4.536	.000
PA	.187	.055	3.410	.001
Adj R2	0.659
F-Stat (Prob)	146.860 (0.000)

Source: Author’s Work (2022)

Notes: Table 4.1 reports the multiple regression of the effect of taxpayers’ ethical behaviour on faithful presentation in the financial statements of listed Deposit Money Banks in Nigeria. The dependent variable is Faithful Presentation of Financial Statement (FPFS), the regressors are Tax Morale (TM), Social Ethical Behaviour (SEB), Taxpayer’s Perception (TP), Trust in Governance (TG), and Power of Authority (PA). All the analysis was tested at 5% significance level.

Model 1

FPFS = β₀ + β₁TM + β₂SEB + β₃TP + β₄TG + β₅PA+ ε_i

FPFS_i = 0.182 + 0.294TM_i + 0.099SEB_i + 0.094TP_i + 0.281TG_i + 0.187PA_i

This Hypothesis examined if taxpayers’ ethical behaviour has a significant effect on the faithful presentation of financial statements of listed Deposit Money Banks in Nigeria. The results reported in Table 4.23 show that tax morale, social ethical behaviour, taxpayer’s perception, trust in governance, and power of authority have a positive relationship with the faithful presentation of financial statements in listed Deposit Money Banks in Nigeria. This connotes that increases in tax morale, social ethical behaviour, taxpayer’s perception, trust in governance, and power of authority will lead to increases in a faithful presentation of financial statements in listed Deposit Money Banks in Nigeria.

This is indicated by the signs of the coefficients, which are  > 0. These results are consistent with a-priori expectations. In addition, as touching the size of the estimated coefficients a 1 unit increase in tax morale, social ethical behaviour, taxpayer’s perception, trust in governance, and power of authority will lead to 0.294, 0.099, 0.094, 0.281, and 0.187 increases in a faithful presentation of financial statement in listed Deposit Money Banks in Nigeria respectively.

Furthermore, there is evidence that tax morale, trust in governance, and power of authority have a significant relationship with faithful presentation of financial statement in listed Deposit Money Banks in Nigeria (TM = 0.294, t–test = 4.782, p < 0.05; TG = 0.281, t-test = 4.536, p < 0.05, and PA = 0.187, t–test= 3.410, p < 0.05). This implies that tax morale, trust in governance, and power of authority are significant factors influencing changes in faithful presentation of financial statement in listed Deposit Money Banks in Nigeria. Conversely, there is evidence that social ethical behaviour and taxpayers’ perception do not have significant relationship with the faithful presentation of financial statement in listed Deposit Money Banks in Nigeria (SEB = 0.099, t-test = 1.928, p > 0.05 and TP = 0.094, t-test = 1.645, p > 0.05). This implies that social ethical behaviour and taxpayers’ perception are not significant factors influencing changes in a faithful presentation of financial statements in listed Deposit Money Banks in Nigeria.

The Adjusted R-square of the model is about 66 per cent, this suggests that variations in a faithful presentation of the sampled population can be attributed to 66 per cent changes in tax morale, social ethical behaviour, taxpayer’s perception, trust in governance, and power of authority, while the remaining 34 per cent variations in the financial presentation are caused by other factors not included in this model.

Decision Rule

At the 0.05 level of significance and degree of freedom (5, 372), the F-statistics is 146.86 and the p-value of the F-statistics is 0.000, which is less than 0.05 level of significance adopted for this study. therefore, the study rejected the null hypothesis which means that taxpayers’ ethical behaviour significantly affect the faithful presentation of financial statement in listed deposit money banks in Nigeria.

Discussion Of Findings

The findings of the objective one negates the empirical findings of Mohammed, Derashd and Abrahin (2016) that investigated how published financial statement correlate with investment decision among commercial bank stakeholders in Nigeria. The findings of their study revealed that balance sheet is negatively related with investment decision. However, income statement, notes on the account, cash flow statement, value added statement and five-year financial summary are positively related with investment decision making. Their findings also revealed that components of published financial statement significantly predicted good investment decision making for commercial bank stakeholders. Meanwhile, Inasious (2019) ascertains the role of financial statement in investment decision making. The study was based on survey and questionnaire used to gather the information. He discovered from the test of hypotheses that financial statement is relied upon in investment decision making and financial statements are useful for forecasting company’s performance. The concluded was drawn based on the findings that financial statement plays a vital role in investment decision making and recommends that no investment decision should be taken without the consideration of a company’s financial statements.

4.2 Hypothesis Two

Research Objective Two: Explore the effect of taxpayers’ ethical behaviour on timely filing of tax returns in listed Deposit Money Banks in Nigeria

Research Question Two: How does taxpayers’ ethical behaviour affect timely filing of returns in listed Deposit Money Banks in Nigeria?

Research Hypothesis Two: There is no significant effect of taxpayers’ ethical behaviour on timely filing of tax returns in listed Deposit Money Banks in Nigeria

Table 4.2 Taxpayers Ethical Behaviour and Timely Filing of Tax Returns

MODEL TWO
Variable	Coeff	Std. Err	T-Stat	Prob
Constant	.704	.168	4.199	.000
TM	.190	.056	3.381	.001
SEB	.098	.047	2.093	.037
TP	.297	.052	5.716	.000
TG	.124	.057	2.184	.030
PA	.151	.050	3.002	.003
Adj R2	0.645
F-Stat (Prob)	138.230 (0.000)

Source: Author’s Work (2022)

Notes: Table 4.2 reports the multiple regression of the effect of taxpayers’ ethical behaviour on timely filing of tax returns in the financial statements of listed Deposit Money Banks in Nigeria. The dependent variable is Timely Filing of Tax Returns (TFTR), the regressors are Tax Morale (TM), Social Ethical Behaviour (SEB), Taxpayer’s Perception (TP), Trust in Governance (TG), Power of Authority (PA). All the analysis was tested at 5% significance level

Model 2

TFTR = β₀ + β₁TM + β₂SEB + β₃TP + β₄TG + β₅PA+ ε_i

TFTR_i = 0.704 + 0.190TM_i + 0.098SEB_i + 0.2974TP_i + 0.124TG_i + 0.151PA_i

This Hypothesis examined if taxpayers’ ethical behaviour has a significant effect on the timely filing of tax returns of financial statements of listed Deposit Money Banks in Nigeria. The results reported in Table 4.24 show that tax morale, social ethical behaviour, taxpayer’s perception, trust in governance, and power of authority have a positive relationship with the timely filing of tax returns of financial statements in listed Deposit Money Banks in Nigeria. This connotes that increases in tax morale, social ethical behaviour, taxpayer’s perception, trust in governance, and power of authority will lead to increases in the timely filing of tax returns of financial statements in listed Deposit Money Banks in Nigeria. This is indicated by the signs of the coefficients, which are  > 0. These results are consistent with a-priori expectations. In addition, as touching the size of the estimated coefficients a 1 unit increase in tax morale, social ethical behaviour, taxpayer’s perception, trust in governance, and power of authority will lead to 0.190, 0.098, 0.297, 0.124, and 0.151 increases in the timely filing of tax returns of financial statement in listed Deposit Money Banks in Nigeria respectively. Furthermore, there is evidence that tax morale, social ethical behaviour, taxpayer’s perception, trust in governance, and power of authority have a significant relationship with timely filing of tax returns of financial statement in listed Deposit Money Banks in Nigeria (TM = 0.190, t–test = 3.381, p < 0.05; SEB = 0.098, t-test = 2.093, p < 0.05; TP = 0.297, t-test = 5.716, p < 0.05; TG = 0.124, t-test = 2.184, p < 0.05, and PA = 0.151, t–test= 3.002, p < 0.05). This implies that tax morale, social ethical behaviour, taxpayer’s perception, trust in governance, and power of authority are significant factors influencing changes in timely filing of tax returns of financial statement in listed Deposit Money Banks in Nigeria

The Adjusted R-square of the model is about 65 per cent, this suggests that variations in a timely filing of tax returns of the sampled population can be attributed to 65 per cent changes in tax morale, social ethical behaviour, taxpayer’s perception, trust in governance, and power of authority, while the remaining 35 per cent variations in the timely filing of tax returns are caused by other factors not included in this model.

Decision Rule

At the 0.05 level of significance and degree of freedom (5, 372), the F-statistics is 138.23 and the p-value of the F-statistics is 0.000, which is less than 0.05 level of significance adopted for this study. therefore, the study rejected the null hypothesis which means that taxpayers’ ethical behaviour significantly affects the timely filing of tax returns of financial statement in listed deposit money banks in Nigeria.

Discussion Of Findings

The second hypothesis of the study explores the effect of taxpayers’ ethical behaviour on timely filing of tax returns in listed Deposit Money Banks in Nigeria. The analysis of this objective shows that tax morale, social ethical behaviour, taxpayer’s perception, trust in governance, and power of authority have a positive relationship with the timely filing of tax returns of financial statements in listed Deposit Money Banks in Nigeria. Furthermore, there is evidence that tax morale, social ethical behaviour, taxpayer’s perception, trust in governance, and power of authority have a significant relationship with timely filing of tax returns of financial statement in listed Deposit Money Banks in Nigeria. In addition, the analysis of the overall significance of the model shows that the null that taxpayers’ ethical behaviour does not have a significant effect on the timely filing of tax returns of financial statements in listed Deposit Money Banks in Nigeria be rejected while accepting the alternate hypothesis and concluded that taxpayers’ ethical behaviour significantly affect the timely filing of tax returns of financial statement in listed Deposit Money Banks in Nigeria.

The evidence corroborates with the findings of Jimenez and Iyer (2016) and Gberegbe and Umoren(2017) that empirically examined the link between Tax compliance in a social setting and the influence of social norms, trust in government, and perceived fairness on taxpayer compliance. The study found that taxpayers found support for the influence of social factors on tax compliance. This study also established that social norm influence compliance intentions indirectly through internalization as personal norms. Specifically, as the strength of social norms in favour of tax compliance increases, personal norms of tax compliance also increase, and this leads to a subsequent increase in compliance intentions. The study further revealed that trust in government has a significant influence on both perceived fairness of the tax system and compliance decisions.

The study of Ayuba, Saad, and Ariffin (2016) investigated how does perceived corruption moderate the relationship between economic factors and tax compliance marginally. The study revealed that perceived corruption significantly moderated the relationship between economic factors and tax compliance marginally.

CONCLUSION AND RECOMMENDATIONS

The compliance of individual towards the payment of tax is essential because it ensures that individual fulfils his/her right. Meanwhile, the ethical tax behaviour of the taxpayers and the tax authorities is a significant factor that ensures strict compliance to the stated procedure of tax payment. Thus, it is on this premise that this study examined the effect of ethical tax behaviour on tax compliance of the listed deposit money banks in Nigeria.

From the findings of the study, the study concludes on the followings; first, taxpayers’ ethical behaviour significantly affects the faithful presentation of financial statement in listed deposit money banks in Nigeria. Second, taxpayers’ ethical behaviour significantly affects the timely filing of tax returns of financial statement in listed deposit money banks in Nigeria.

The study recommended that:

1. The management of the listed deposit money banks should put in place trainings that will encourage ethical orientation and reorientation of all top-level management staff involved in the preparation of the financial statement to ensure faithful presentation of financial statements, as the mindset of the top-level management staff constitute a strong influence on the decisions of the DMBs on the filiing of honest and accurate financial statement and tax returns. The level of focus on accounting standards, regulations and auditing should be extended to the ethical behaviour of managers, accountants, and auditors, including regulators.
2. The tax authorities should put in place tax laws and policies that will enforce timely filing of tax returns and voluntary compliance of listed deposit money banks. Voluntary compliance with checks and balances must be promoted so that citizens will cooperate with tax authorities by filing honest and accurate annual returns.

CONTRIBUTION TO FUTURE RESEARCH

The study has been able to establish that ethical behavior influenced the faithful filing of financial statements and the timely filing of returns. The results will influence the government to formulate policy and execute reforms that will bring morale-suasion to the taxpayers to comply with tax laws. The social contract theory will practice the theory in reality because paying taxes gives the government the obligation to tax justice.

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