Value Added Tax Compliance and Revenue Generation in Enugu State: Challenges and Prospects

Value added tax (VAT) remains one of the most significant indirect tax instruments for revenue generation in Nigeria, yet compliance gaps and enforcement challenges continue to limit VAT yield efficiency in Enugu State and other sub-national contexts. This study examined VAT compliance levels and their implications for revenue generation in Enugu State, with focus on registered businesses in the Enugu metropolis. The study was anchored on the deterrence theory of tax compliance, which posits that the perceived probability of detection and severity of penalties are key motivators for compliance. A descriptive survey design was adopted, with a population of 428 VAT-registered business owners and tax officials. A sample of 206 respondents was selected using systematic random sampling. Structured questionnaires and interview guides served as data collection instruments, and data were analyzed using descriptive statistics and logistic regression. Findings revealed that poor enforcement, limited tax education, and high compliance costs were the most cited barriers to VAT compliance among respondents. Higher penalty awareness and audit frequency were positively associated with compliance rates. The study concluded that enforcement gaps and taxpayer ignorance are primary drivers of VAT non-compliance in the state. It was recommended that the Federal Inland Revenue Service should deploy technology-driven VAT auditing systems and intensify taxpayer awareness campaigns targeting SMEs and informal sector operators.

Keywords: Value added tax, tax compliance, revenue generation, deterrence theory, Enugu State