Perception of petroleum profits tax compliance in Nigeria.

Abstract

The aim of this research is to examine whether the extent of tax compliance by oil producing companies in Nigeria is determined by the knowledge, remuneration and incentives of government tax officials. This study sets out to investigate the extent of compliance of oil and gas (exploration and production) companies with the Petroleum Profits Tax Act and to confirm whether lack of sufficient knowledge of the PPT law and poor remuneration and incentives of government tax officials affect tax administration in the upstream sector of the petroleum industry in Nigeria. An extensive literature review was conducted on the historical and legislative background and the incentives available to petroleum companies in Nigeria. The review also covered theories of taxation, tax administration and compliance, tax reforms, tax avoidance and evasion. The literature review revealed gaps which this study attempts to fill. This research has concepts that require both qualitative and quantitative approaches in its design, data collection and data analyses. Consequently, a combination of quantitative and qualitative methods was adopted for this study. Face to face interviews were held with experienced regulatory, tax, petroleum companies’ officials and tax and audit practitioners. The researcher uses literature to develop hypotheses which are tested using survey results and backed up by personal interviews. This helps in obtaining results about the behaviour of taxpayers and tax officials in the upstream sector of the petroleum industry in Nigeria. By using a survey, the researcher is able to assess the perceptions of a cross-section of stakeholders in the Nigerian oil industry about the level of compliance with the PPT law. The personal interviews with oil experts provide the benefit of their in-depth knowledge of the oil industry in Nigeria and furnish an understanding of their social world. This research seems to support the perception that the oil producing companies may not be complying fully with the provisions of the Petroleum Profits Tax Act and the Petroleum Act in relation to the payments of royalty and PPT. Interview results suggest that there is a lack of an adequate database of all company taxes paid in Nigeria, minimisation of monthly Royalties and PPT instalments, a dearth of experts on fiscal issues, overwhelming influence of the oil producing companies, poor attitude and inadequate knowledge of the operations of the petroleum industry amongst government tax officials.