INTRODUCTION

• Introduction

This piece of work is structured into five chapters which proceed as follows. Chapter one deals with introduction, background of the study, statement of the problem, research question, research objective, hypothesis, and scope of study, significance of the study and operational definition of terms. Chapter two is concern with literature review which focused on conceptual, theoretical and empirical review and also the research gap and contributions. Chapter three is concern with research design, area of study, population, sampling size and sampling procedures, instruments, data collection, method of data analyses. Chapter four is concern with data analyses and presentation of data. Chapter five is concern with discussion of findings, conclusion and recommendation.

• Background of the Study

Taxation is a major tool by which governments worldwide generate resources to discharge their duties. Tax which is a compulsory levy to be honored by those (taxable persons)upon whom they are charged, with or without returns from the Government(Abudu & Adam 2023), provides funds to benchmark government expenditure in an economy (Armah-Attoh & Awah ,2013) Yew, Milanov &McGee2015).

 The exact meaning of tax compliance has been defined in various ways. Kirchler (2007) perceived a simpler definition in which tax compliance is defined as the most neutral term to describe taxpayers’ willingness to pay their taxes. Another definition of tax compliance is a person’s act of filing their tax returns, declaring all taxable income accurately, and disbursing all payable taxes within the stipulated period without having to wait for follow-up actions from the authority (Singh, 2003). Tax compliance can also be seen as when taxpayers fill all their tax returns by disclosing all income truthfully and settling the tax obligations due per tax laws and regulations ( Palil & Mustrapha 2011). Tax compliance has been further defined as the point at which tax rules of a country are been complied with by taxpayers as they declare income,file returns and pay tax liability on time (OECD), 2016; Vikneswaran et al, 2016).

McBarnet (2019) asserted that tax compliance should be viewed under three dimensions consisting of committed compliance (the willingness to pay taxes with no complaints), capitulated compliance ( to give in and pay taxes reluctantly) and creative compliance ( reducing taxes by lawfully redefining income and deducting expenditure). Comparatively, tax compliance  is better among advanced countries than emerging countries (Mas’ud et al.,(2019). Oladipo, Iyoha, Fakile , Asaleye and Eluyela (2019) attributed  this to the tax system ( available institutes and instruments enabling tax authorities to discharge their work economically, effectively and efficiently)employed in developed countries. Eluyela etal, (2019) revealed that the revenue generated is likely to be affected  should the institute and instrument of taxation (the tax system) encourage mismanagements, leakages and corruption. Prior studies (Carroll 2011; Terkper, 2013WorldBank, 2017) on tax compliance revealed low compliance in the informal sector compared to the formal sector.

According to Gcabo and Robinson (2007), tax collection is critical to any nation even though it is understood or disliked by the citizens. They went on to arguing that, even though the residents acknowledge the necessity to pay taxes and appreciate the welfares offered by the government in the civic service, tax compliance is not liked by the majority. It is critical that the importance of tax compliance is understood because it determines how the government shapes lives of citizens (Oberholzer, 2008).

However, taxpayers find it difficult to comply ( Maseko 2014; Masarirambi 2013;Seidu, & Sebil, 2015). Given this, the issue of tax compliance has been a global concern for many years( Ritsatos 2014; Yusof, Ling &Wah, 2014). To reduce non compliance among Chinese taxpayers, Noked and Nu (2020) proposed a voluntary disclosure practice policy and how tax authorities should administer this practice policy.

Goradichenko, et al., (2009) stated that tax evasion is a universal and growing phenomenon. Research evidences available have shown that the problems of tax evasion cut across the globe from developing countries to developed countries. For instance, Embaye (2007) also reported that evasion is considerable in U.S with about 16% overall noncompliance for individual income tax. The concept related to tax evasion is tax avoidance, which is described as creative compliance in McBarnet (2003).

However, according to Sandmo (2005) there is conceptual distinction between tax evasion and tax avoidance. The distinction between these two concepts hinges on the legality of taxpayer’s actions. He distinguishes the two concepts from legal perspective. He said that tax evasion is carried out in violation of the law, therefore is illegal while tax avoidance is carried out within the legal framework of the tax law in order to reduce one’s tax liability, therefore tax avoidance is legal.

 Everest-Phillip (2009), argued that public governance quality is necessary to have good tax system and equally good tax system is essential to achieve public governance quality. Citizens support government in its responsibilities through the provision of finance in form of tax payment. What is happening in government therefore, should matter to the taxpayers because they provide the finance for its sustenance. As a result, governance affairs may have either positive or negative influence on the compliance behaviour of the taxpayers.  Compliance in pure administrational terms therefore includes registering or informing tax authorities of status as a taxpayer, submitting a tax return every year (if required) and following the required payment time frames (Ming Ling et al., 2005).

In contrast, the wider perspective of tax compliance requires a degree of honesty, adequate tax knowledge and capability to use this knowledge, timeliness, accuracy, and adequate records in order to complete the tax returns and associated tax documentation (Singh & Bhupalan, 2001).

In line with Singh et al (2005) claimed that the wider perspective of compliance becomes a major issue in a self-assessment system since the total amount tax payable is highly dependent on the levels of tax compliance this perspective reveals, although it is inevitable that tax authorities will seek to ‘influence’ the areas taxpayers have influence over determining to reduce the risks of non-compliant behaviour they face otherwise for example through continuously conducting tax audits of different sorts and other means such as various compliance influencing activities including tax education.

Determinants of Tax Compliance currently, evasion of taxes by property owners in the real estate sector is becoming common in most countries. There is a growing body of research into taxpayer compliance behaviour that is helping to develop a better understanding of what motivates taxpayers to comply, or not, with requirements of the tax system (Gayer &Mourre, 2012). Several penalties are conferred upon property owners who fail to comply with some of the tax laws, irrespective of the conferment of these penalties; property owners in the real estate continue to evade taxes. According to Mwangi (2014) one of the main tax evasion reason is the high personal income tax rates, which tend to lead taxpayers to evade tax. It is generally believed that a high tax rate is the main cause of tax evasion. Incentives to evade tax depend on the marginal rates of taxation because these govern the gains from evasion as a sum of the tax evaded. Perception towards tax and its general compliance levels has also been identified as a major factor which influences compliance of tax (Mukabi, 2014). Property owners may respond positively or negatively depending on how they perceive tax. Property owners can actively lean towards avoiding taxes when their perception on residential rental income tax is negative, which has a negative effect on their compliance and the opposite is also true. Thus, a taxpayer with positive attitude toward tax evasion is expected to be less compliant than a taxpayer with negative attitude.

Social psychologists further express how property owners’ awareness to the new rental income regime affects their compliance. Kirchler, et. al. (2008) noted that knowledge of tax is crucial since when an individual knows what is supposed to be done they will always comply. A taxpayers’ willingness to pay taxes in the real estate sector may possibly be augmented when they are aware about the new rental income regime. While in such a case, if the property owners are aware of the new residential rental income tax regime they may choose to voluntarily comply but if they are not aware they may not voluntarily comply.

Use of Information Technology by Fako Division Authority has been seen to affect tax compliance. According to Jones (2009) tax compliance is the timely filling and reporting of required tax information, the correct self-assessment of taxes owed, and the timely payment of those taxes without enforcement action. The rapidly increasing pace of technological change will have a significant impact, positive and negative, direct and indirect, on tax compliance. Therefore, the study intends to find out the determinants of tax compliance in South West Region.

Tax Compliance in Cameroon refers to th country’s goal in which Revenue authority is to collect a country’s taxes.  According to Grampert (2001) the authority should sustain confidence in the tax system and understand taxpayer’s attitude on the rise in demand by the public for quality services from tax authorities over the years in Cameroon. This was achieved in April 2000 through the creation of taxpayer services unit to ensure that the country attains increased demand for quality taxpayer services. The revenue authority allows taxpayers to visit their offices for information related to tax and registration as taxpayers. A Revenue authority is therefore required to provide worthy service to the taxpayers by meeting the characteristics of quality services including; urgency, promptness, precision, clarity, and tax knowledge. Revenue officers should have the right attitude in provision of quality taxpayer service by being decisive and avoiding arrogance, unreceptive, impatience and appearing bored (Surrey, 2012).

Tax compliance is defined as the full payment of all taxes due (Braithwaite, 2012). Tax non-compliance is referred to as any difference between the actual amount of taxes paid and the amount of taxes due. This difference occurs because of overstating expenses or deductions and understating income. Non-compliance in the real estate sector comprises both intentional evasion and unintentional non-compliance, which is due to calculation errors and an inadequate understanding of tax laws (Robben et al., 2004).

The real estate sector has high growth potential with building and construction sector having grown by 7.3%, 8.2%, 12.7%, 4.5% and 4.3% in 2007, 2008, 2009, 2010 and 2011 respectively. For the past two decades, the south west real estate market has grown exponentially as evidenced by its contribution to the country’s GDP which grew from 10.5% in 2000 to 12.6% in 2012 and 13.8% in 2016 (Collins, 2019).This indicates the growth experienced in the real estate sector over the years. Despite this significant growth, there has been no corresponding tax increase in the sector.  Tax compliance in the real estate sector is mainly achieved when majority of property owners voluntarily file their tax returns and pay resultant tax liabilities as stipulated in the tax laws, without the intervention of the tax authorities through enforcement. However, if the voluntary compliance is low, then enforcement measures like audit and collection are resorted to, hence the research gap is to be covered in this study.

1.3 Statement of the Problem

Taxation patterns around the world today reveal large cross-country differences, especially between developed and developing countries. In particular, developed countries today collect a much larger share of their national output in taxes than the developing countries; and they tend to rely more on income taxation to do so. Developing countries, in contrast, rely more heavily on trade taxes, as well as taxes on consumption. Ortiz-Ospina et al. (2019) established that cross-country differences in tax revenues are linked to the capacity of countries to implement efficient tax collection systems. The real estate sector has high growth potential with building and construction sector having grown. For the past two decades, the Southwest real estate market has grown exponentially as evidenced by its contribution to the country’s GDP (Otang,  2019).This indicates the growth experienced in the real estate sector over the years. Despite this significant growth, there has been no corresponding tax increase in the sector. Fako Division has not met its targets in revenue collection for the past few years especially in the monthly residential rental income tax obligation. This study ideally sought to find out what really determines tax compliance despite the fast growth in the sector. Despite the numerous researches that have been done on tax compliance in the other sectors of the economy, a few researches have been done on tax compliance in the real estate sector in Cameroon. This is because the residential rental income tax was introduced in Cameroon in the year 2016. This research will explore this gap by finding out the determinants of tax compliance.