Tax Fairness Literature Review

Tax Fairness: Tax fairness as perceived by prior literatures could either be vertical or horizontal fairness. According to Erich, Niemirowski & Wearing (2006) vertical tax fairness is when taxpayers’ are being treated or taxed with different rate based on their different business activities. On the other hand, horizontal tax fairness is the instance where taxpayers’ are being treated equally in terms of their taxes (Michael, 1978). Horizontal tax fairness indicates that taxpayers’ that are into same business activities and earned same income should probably pay same taxes. Mukasa (2011) found that improved tax fairness would lead to the enhancement of compliance behaviour. The impact of tax fairness which the taxpayers perceived may possibly

The self-assessment system was introduced for Income Tax and VAT in 1992 as a strategy to enhance tax compliance by making it easier for taxpayers to assess their own tax liability, file return, report that assessment and pay taxes due. This system allowed for proper identification of all entities required to pay taxes through the issuing of Unique Personal Identification Number (UPIN) that could be fed into a master file upon which updates are made and retrievals done much faster. The major drawback to revenue enhancement by self-assessment system is the large share of informal sector in Nigeria. Many small scale thriving businesses have unlimited scope of evading tax based on their perception regarding costs associated with compliance and the economic benefits of going undetected. They are also largely illiterate who lack access to affordable experts’ advice on tax

A common demographic variable is the taxpayer’s age. A positive link between age and taxpayer compliance is reported in (Fischer, Wartick & Mark, 1992). In general, young taxpayers are more willing to take risks and are less sensitive to sanctions. Traditionally, females have been identified with conforming roles, moral restraints and more conservative life pattern. Education, as a demographic variable relates to the taxpayers’ ability to comprehend and comply or not comply with the tax laws .Two aspects of education have been distinguished: “the general degree of fiscal knowledge and the degree of knowledge involving evasion opportunities” (Groenland & Veldhoven, 1983). The degree of knowledge and information might be an important factor in the way taxpayers’ behave. Better educated taxpayers’ are supposed to know more about tax laws and fiscal policies and thus would be in a better position to assess the degree of compliance (Lewis, 1982). However, it should be noticed that there might be people with a lower education who have acquired a high