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This project is on An examination of problems and prospects of real property taxation in Nigeria. Increasing demand for urban  infrastructures on land   and  dwindling  revenue  allocations  in  Nigeria  have informed the Rivers State Government to promulgate Land Use Charge Law (2001) as a way of increasing internally-generated revenues through property tax. The Law stipulates a formula for assessing the Charge payable on properties in Lagos State, amongst other provisions. The aim of this research is to identify the problems and prospects of real property taxation in Nigeria. This study found that high tax and penalties may discourage investment in new housing and maintenance of existing real properties in Nigeria. It therefore recommended a review of the Land Law and in addition suggested an appropriate basis of fair and equitable tax.

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This project is on An examination of problems and prospects of real property taxation in Nigeria. The subject of taxation has received considerable intellectual and theoretical attention in the literature. Taxation is one of the most volatile subjects in governance both in the developing and developed nations. Tax refers to a “compulsory levy by a public authority for which nothing is received directly in return” (James and Nobes, 1992). According to Nightingale (2001), “a tax is compulsory contribution, imposed by government, and while taxpayers may receive nothing identifiable in return for their contribution, they nevertheless have the benefit of living in a relatively educated, healthy and safe society”. She further explains that taxation is part of the price to be paid for an organized society and identified six reasons for taxation: provision of public goods, redistribution of income and wealth, promotion of social and economic welfare, economic stability and harmonization and regulation.

In other words, a tax is an imposed levy by the government against the income, profits, property, wealth and consumption of individuals and corporate organizations to enable government obtain the required revenue to provide basic amenities, security and well-being of the citizens. First detailed information about taxation can be found in Ancient Egypt (Webber and Wildavsky,1986). The Pharaohs appointed tax collectors (called scribes) and paid them high salaries to reduce the incentives to enrich themselves. Furthermore, scribes working in the field were controlled by a group of special scribes from head office. Today, corruption of the tax agency is still a problem, especially in developing countries.

Nigeria is governed by a Federal system and the government’s fiscal power is based on a three- tier tax structure divided among the Federal, State, and Local governments, each of which has different tax jurisdictions. The Nigerian tax system is lopsided. The federal government controls all the major sources of revenue like import and excise duties, mining rents and royalties, petroleum profit tax and company income tax, value added tax among other revenue sources. State and local government taxes are minimal, hence, this limits their ability to raise independent revenue and so they depend solely on allocation from Federation Account.

In 1992, the government introduced self  assessment scheme, under which a taxpayer is expected to fill a tax assessment form to determine his taxable income. Here, the intrinsic motivation to pay tax (that is, tax payment) will determine the level of compliance with reporting requirements. Which means that the taxpayer files all required tax returns at the proper time and that the returns accurately report tax liability in accordance with the law. The advent of democratic rule in 1999 has put greater pressure on the three-tier of governments to generate enough revenue and meet electoral promises in terms of provision of basic necessities and infrastructure for the economic empowerment of the people. To achieve these goals taxpayers must pay their taxes willingly as and when due. In other words, a high tax payment is required from the taxpayer in order to achieve a high degree of tax compliance.

Webley et al. (1991), detect a positive relationship between government performance and tax compliance But in spite of all the researches that have been done, more empirical work is needed to confirm the existence of these relationships and to measure the strength of their influence on tax compliance. This is particularly so, since tax compliance is of obvious importance fo r most countries. This work aims to study tax compliance in Nigeria, thereby supplementing empirical research on this important international problem. This is therefore an opportunity to take a stroll through theoretical and empirical findings in the tax payment literature, focusing on Personal Income tax payment.


Funding of infrastructure, especially in urban areas in time of dwindling revenue allocations from the Federal Government, has posed great challenge to State and Local Council Governments. This has led the Lagos State Government to source for a new means of generating additional revenue internally through property tax. The Land Use Charge Law 2001 was therefore a creation of the River State Government to give legal backing to revenue generation through property taxation in order to provide sustainable housing delivery.

A number of questions arise: What will be the short- and long-run effects of the provisions of the Land Use Charge Law on River State Real Estate property managers? Is the basis for calculating the charge reasonable? What is the position of Estate Surveyors and Valuers regarding the provisions of the Law? What is sustainability and sustainable housing delivery? What impact(s) will the Law have on sustainable real property delivery in the study area? The aim of this research is to examine the Land Use Charge Law (2001) and determine its effects on sustainable real property delivery in Nigeria. In doing so, succeeding sections cover the challenge, basic method of determining fair and equitable property tax, highlight the provisions of the Law, and analyze the opinions of practicing Estate Surveyors and Valuers followed by appropriate recommendations.


Low tax compliance is a matter of serious concern in many developing countries. This is because it limits the capacity of government to raise revenue for developmental purposes (Torgler, 2003). This implies that the higher the revenue, the more likely government will put in place developmental plans for the enhancement of the living standard of the people. This is because when people pay taxes more revenue accrues to the government. The major problem of this research therefore, is to determine the effect of tax payment on the taxpayer in compliance with tax policies of government as a useful avenue for revenue generation.

The  more  modern  approach  to  tax  compliance  has  benefited  from  many  contributions  from different disciplines. There is a range of factors that might influence taxpaye’s behavior. For instance, work in sociology has identified a number of relevant variables such as age, gender, race and culture. The role of individuals in the society and accepted norms of behavior have also shown to have a strong influence (Wenzel, 2002). Also Polinsky and Shavell (2000), present a survey of the economic theory of public enforcement of law, and emphasize the aspect of social norms, that can be seen as a general alternative to law enforcement in channeling individual behavior.

There are limits for a government to increase compliance using traditional policies such as audits and fines. Therefore, if the government can influence a norm, tax evasion can be reduced by policy activities. Most researchers on tax compliance for example, (Torgler, 2003), (McBarnet, 2003) and (Murphy  and  Harris,  2007).  focused  their  attention  on  the  Western  World  and  some  Asian countries. Socio-cultural factors are important components in the lives of a people and given the deep-rooted and pervasiveness of these in the Nigerian societies, there is a clear  need for more empirical research on the factors involved  in the decision making process regard ing compliance, since a better understanding of these factors can give birth to strategies that improve compliance. It is therefore, the focus of this study to subject tax compliance to empirical analysis in the Nigerian context.


The general objective of this study is to determine the effect of Tax compliance with tax policies of government in Nigeria. In doing so, it seeks to:

i  Determine  the  extent  of tax  payments of real properties in Nigeria

ii  Ascertain the effect of trust in government on tax compliance.

iii  Examine the effect of Nigerian Traditional Institution on tax payments

iv  Determine the effect of cultural norms on the tax payments.

v   Ascertain the tax payer’s confidence in the legal system in Nigeria.


This study is an effort at understanding the problems and prospects of real estate taxation in Nigeria. Therefore, the study is hinged on the following questions;

i   What is the effect of tax compliance on the society?

ii  Will trust in government affect tax compliance?

iii  To what extent has confidence in the legal system affect tax compliance?

iv   What is the relationship between Traditional Institution and tax payment?

v   To what extent has social norms affect tax payment?


Hypotheses are assumptions on which a researcher bases his investigation and on the basis of which a confirmation of the assumed conditions are tested and validated. The hypothesis on which this research study is based are stated in null form as follows:

i  Hο;   Tax morale has no significant effect on tax payer compliance.

ii  Ho; There is no significant relationship between trust in government  and tax compliance.

iii Ho;  There is no significant relationship between the Nigerian Traditional Institution and tax compliance.

Iv Ho;  There is no significant relationship between tax payers cultural norms and the extent of their tax compliance

v   Ho; There is no significant relationship between the tax payers  confidence in the legal system and tax compliance.


1.6.1 Theoretical Significance

The deterrence doctrine can be traced back to the classical works of Jeremy Bentham and Cesare (Murphy,2008). Their classical utility theory of crime is that people are rational actors who behave in a  manner that will maximize their expected utility. Becker (1968) argued that authorities needed to and appropriately balance between detection of non-compliers and sanctions to the point where non-compliance becomes irrational.

In the early 1970s, Alligham and Sandmo (1972) extended Becker‟s  work on the economics of crime to the taxation context. They examined taxpayer’s  decision to evade taxes when they were filling out their tax returns and examined the relationship between penalty rate for tax evasion at the time, the probability of detection, and degree of tax evasion engaged in. What they found was that there was a relationship between these variables; with a higher penalty rate and probability of detection deterring individuals from evading their taxes. In the 1980s, therefore, many scholars began to question the value of deterrence alone in regulating behavior. They began to focus their attention on researching compliance rather than deterrence and began to realize the importance of persuasion and cooperation as a regulatory tool for gaining compliance. In fact, research has shown that the use of threat and legal coercion, particularly when perceived as illegitimate, can produce negative behavior; these actions are more likely to result in further non-compliance (Murphy and Harris 2007), creative compliance (McBarnet 2003), criminal behavior or opposition (Fehr and Rokenbach 2003).

According to Kagan and Scholz (1984), unreasonable behavior like disrespect for citizens, arbitrary refusal to take their concerns into consideration by regulators during enforcement generates resistance to compliance. Tyler (2006) argues that if regulators are prepared to first engage in dialogue and fair treatment with those they regulate, then, this will serve to encourage support for the law. Most research works in this area of study have focused on Western world and some Asian countries; therefore, the significance of this study lies in the fact that it will provide a framework for inter-state comparison between nations of the world. Moreover, our findings and conclusion will form a basis for further research work.

1.6.2 Practical Significance

With the current effort at social and economic development by Third World countries such as Nigeria, a study like this is significant, as it is capable of contributing to the present knowledge in the area of interaction between socio-cultural factors and tax compliance, which may be in terms of consequences for policy issues and development programmes.

1.6.3 Operational Significance

Tyler (1997) has specifically shown that people value respective treatment by authorities and view those authorities that treat them with respect as more entitled to be obeyed. The operational significance of this study therefore, lies in the fact that; tax authorities will tend to be more oriented towards seeking result, through cooperation rather than by coercion alone, and prefer to see themselves as service providers rather than as strict law enforcers.


This study evaluates the effect of tax payment on tax evasion, tax avoidance and tax compliance in Nigeria. The study however, is limited to the study of organizations in the public, private and informal sectors of the Nigerian Real Estate economy. These organizations are selected because they are duly registered with the Federal Inland Revenue Service and the Lagos State Internal Revenue Service for Pay As You Earn (PAYE). Also from the notes to their audited accounts, there has never been any negative report regarding tax evasion or tax avoidance. The limitation of this study, however, is in the area of methodological constraints in terms of which type of analytical technique is most appropriate for the work. In addition, because of funds and time constraint, the work is further limited to the selected organizations.


The study adopted survey research design for data collection through standardized questionnaires administered to respondents. The population for this study comprised anybody of eighteen (18) years  and  above  who  is  in  employment  (both in  the  private  and  public)  sectors of Nigerian economy. Six organizations in the public, private and informal sectors formed the sample size of this study. Furthermore, a total number of 100 questionnaires were administered in each of the six public and private organizations. The nominal as well as the 7-point Likert Scale was employed in the study.

The data collected allow for measuring tax compliance as dependent variable and to search for factors that shape tax payment. Survey provides a good source of information about tax payment. The main advantage is that they include many socio-economic, demographic and attitudinal variables, thus, in a multivariate analysis; we can analyze what shape tax compliance using the multiple linear regression model. But it should be noted that surveys can be biased if they do not cover a representative  share  of the  population.  In  other  words,  a  high  response  rate  is  required.  The sensitive nature of compliance information might discourage participation in such a survey, therefore, to reduce this problem, this study covered a broad variety of questions on different topics. Furthermore, the way we describe tax payment is less sensitive compared to a question asking whether a person has evaded taxes or not. Hence, we expect a higher degree of honesty in the answers to these questions.


The study made use of primary source for data collection through standardized questionnaire administered to respondents and literatures. Questionnaire was administered to the respondents because of its advantage. It  enables vital information, which cannot  be obtained  from written records to be at the disposal of the researcher. This is because in a questionnaire, the respondent’s anonymity is assured.


Tax:  Tax is an imposed levy by the government against the income, profit, property, wealth and consumption of individuals and corporate organizations.

Tax Evasion:  Tax evasion is a deliberate act on the part of taxpayer not to pay tax due.

Tax Avoidance: Tax avoidance is a way of identifying the loop-hole in the tax law and then taking advantage of such a loop-hole to reduce the tax payable.

Tax Avoision:  Tax avoision is a situation where the tax law might be unclear, thereby, confusing taxpayer as to the correct tax payable.

Tax Payment:  Tax Payment is the intrinsic motivation to pay tax.

Tax Compliance: Willingness to pay taxes without threat or coercion

Social Norms:  A set  of behavioural models and rules  or  standard  of behaviour  shared  by members of a social group.

Cultural Norms:  Are behavior patterns that are typical of specific groups.

Legal System:  A system for interpreting and enforcing the laws

Tax System:   A legal system for assessing and collecting taxes

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