Digital Tax Policies and Tax Gap of Informal Sector in Emerging Markets
DOI:
https://doi.org/10.56532/mjbem.v4i2.125Keywords:
Digital tax policies, Taxpromax, Electronic tax system, Digital tax reporting, Tax GapAbstract
Tax gap has been a significant issue for economies worldwide, with the informal sector facing an even greater disparity. It is important to explore how digital tax policies can help address this problem. In light of this, this study investigated the effect of digital tax policies on the tax gap within the informal sector in Southwestern Nigeria. This study employed survey research design, and the population included 3,145 tax officers from the Federal Inland Revenue Service (FIRS) as of December 31, 2023. A sample size of 351 tax officers was determined using the Krejcie and Morgan formula while data was obtained through close ended questionnaire. The data was analysed using partial least square through the aid of SMARTPLS. The empirical results analysis showed that both electronic tax system and digital tax reporting have positive and significant effect on tax gap within the informal sector in southwestern Nigeria with the beta coefficient of 0.354, 0.476, and p-value of 0.020 and 0.016 respectively. Meanwhile, taxpromax showed a positive but statistically insignificant effect on tax gap in the informal sector with the beta coefficient of 0.170 and p-value of 0.393. This study concluded that when identifying factors that can reduce underreporting of income by eligible taxpayers, the usage of online portals for tax filing and payment are significant practice that should be encouraged especially among the informal business sector in southwestern, Nigeria. It is recommended that electronic tax system should be improved on for easy submission of forms and tax calculation for better compliance and reduction in tax gap. Then taxpromax should encourage adopt e-invoice and tax education to increase tax net in the informal sector.
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Copyright (c) 2025 Gbenga Olanrewaju AKINBOBOYE, Olusola Esther IGBEKOYI, Muideen Adeseye AWODIRAN, Muyiwa Emmanuel DAGUNDURO
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