Tax Justice and Tax Compliance: Empirical Evidence from South West Nigeria

The objective of this study is to investigate the effect of tax justice on tax compliance in South West Nigeria. Social contract theory provides the nexus between morals and political behavior, as tax compliance by individuals and corporate taxpayers helps governments fund budgets and deliver social goods and services to their citizens. Tax compliance in Nigeria is increasingly on the decline, as the level of motivation among taxpayers is quite low possibly due to the prevailing perception of tax injustice, lack of transparency, and absence of optimal utilization of tax revenue in line with social contract theory. The study adopted a survey research design and involved a population of 3,250 eligible taxpayers. The sample size from each of the states in the South West Nigeria was explored. The Taro Yamane formula was used to determine a sample size of 356, while the proportionate sampling technique was used to determine the distribution of the sample size to each state in the study. A structured questionnaire was used to collect data from the respondents, and the response rate was 86%. The validity and reliability of the instrument was based on Kaiser–Meyer–Olkin (KMO) and Bartlett’s tests; the Cronbach’s alpha reliability ranged between 0.89 and 0.96. The results show that tax justice has a significant effect on tax compliance. The study recommends that governments should ensure optimal utilization of tax revenue to increase tax compliance.