Why information technology is constrained in tackling tax noncompliance in developing countries: Nigerian tax administrators’ perspectives

Abstract

Purpose

This study aims to investigate the reasons for the large scale tax noncompliance prevalent in underdeveloped countries despite many years of information technology (IT)-led tax administration reforms.

Design/methodology/approach

The study is based on in-depth interviews with 18 senior tax administration officials. Their experiences were used to construct a grounded theory to explain the constraint of IT in tackling the prevalent tax noncompliance in underdeveloped countries.

Findings

First, IT is not immune to the systemic corruption prevalent in many developing countries; hence, it is quickly compromised. Second, IT can be efficient in dealing with registered taxpayers but cannot deal with the overwhelming large numbers of operators in the informal sector. Third, E-tax administration, which is a hallmark of IT-led tax administrations in advanced countries, is very slow to catch up in developing countries. A computerized tax administration alone, as currently obtainable in developing countries, is not enough to engender large usage of e-filing. Businesses, especially small and medium-sized enterprises (SMEs), need IT infrastructure as well to align with tax administration. Unfortunately, basic IT infrastructure is yet to be available to a large section of SMEs in developing countries.

Research limitations/implications

Underdeveloped countries are diverse. This study is from a single country and there may be need to take note of other countries’ peculiarities. However, Nigeria constitutes a good case study.

Practical implications

There is need to reform the people and systems along with IT originality/value.

Originality/value

To the authors’ knowledge, this study is the first to explore this very important question and among the first to explore tax administrators’ perspectives.

Citation

Umar, M.A. and Masud, A. (2020), "Why information technology is constrained in tackling tax noncompliance in developing countries: Nigerian tax administrators’ perspectives", Accounting Research Journal, Vol. 33 No. 2, pp. 307-322. https://doi.org/10.1108/ARJ-11-2018-0205