Tax Compliance Behavior Among Small and Medium Enterprises in Enugu State: The Role of Tax Knowledge and Perceived Fairness

Tax non-compliance among small and medium enterprises (SMEs) continues to undermine government revenue generation and fiscal policy effectiveness in Nigeria, raising concerns about the adequacy of existing tax education and enforcement mechanisms. This study investigated the influence of tax knowledge and perceived fairness on tax compliance behavior among SMEs in Enugu State, with particular attention to enterprises registered under the Enugu State Board of Internal Revenue. The study was grounded in the fiscal psychology theory, which emphasizes psychological and cognitive factors as determinants of taxpayer behavior. A descriptive survey design was adopted. The target population comprised 860 registered SME owners and tax practitioners in Enugu metropolis, from which a sample of 274 was selected using the stratified random sampling technique. Data were collected through a validated questionnaire and analyzed using binary logistic regression. Results showed that tax knowledge had a statistically significant positive effect on compliance behavior, while perceived tax fairness moderately influenced willingness to comply. The study concluded that SMEs with higher tax literacy and positive perceptions of system equity demonstrated greater compliance tendencies. It was recommended that the Federal Inland Revenue Service should intensify SME-targeted tax education campaigns and review perceived inequities in the existing tax structure to foster voluntary compliance.

Keywords: Tax compliance, small and medium enterprises, tax knowledge, perceived fairness, fiscal psychology