The Effect of Institutional Quality on Willingness to Pay Tax in Ilorin South, Kwara State, Nigeria

Purpose: This study examined the effects of institutional quality on willingness to pay tax in Ilorin south, Kwara State, Nigeria Design/Methodology/Approach: The data used was collected through a random sampling method in the selected local Government in Kwara State, Nigeria. Due to the ordered nature of the dependent variable, that is, willingness to pay taxes, the ordered logit regression method was employed. The odds of each of the dependent variables on the respondent’s willingness to pay taxes were then analysed using Stata 18 software Findings: The results showed that two of the three measures of institutional quality, namely the level of tax evasion difficulty and the level of tax evasion punishment, increase the odds of the respondent’s willingness to pay taxes. Respondent income likewise has a positive, significant effect on the odds of willingness to pay taxes, while household size is negatively and significantly related to respondents’ willingness to pay taxes. Conclusion: The results show that strengthening tax authority quality will enhance tax revenue generation in the study area and the country. The result further shows that the Government will be able to generate more tax revenue if a progressive tax rather than a regressive tax policy is put in place in the study area. Since household size has a negative relationship with willingness to pay taxes. Larger family sizes should be discouraged in the study area because of its negative effect on the citizens’ willingness to pay taxes. When the family size is large, the burden of dependency on the household heads will discourage them from paying taxes.