Compliance of Tax Reforms on Infrastructural Development in Nigeria: The SEM Approach

Abstract

Nigeria’s current tax-reform agenda is intended to simplify the legal framework, modernise administration, broaden the tax base and improve domestic revenue mobilisation. Whether these reforms acquire developmental legitimacy, however, depends on two connected outcomes: taxpayers must comply with the reformed system, and the resulting revenue must be converted transparently into visible infrastructure. This article developed a structural equation model in which reform quality and clarity, digital tax administration, taxpayer support and education, and fair enforcement predict tax compliance; compliance predicts revenue mobilisation; and revenue mobilisation predicts infrastructural development, with transparency and accountability moderating the final relationship. Fiscal exchange reasoning was integrated with the slippery-slope perspective to provide the theoretical basis. The proposed survey instrument contains 32 reflective indicators designed for businesses, tax practitioners, revenue officials and public-finance stakeholders. A dataset of 438 cases was used solely to demonstrate the analytical procedure. Partial least squares structural equation modelling yielded satisfactory measurement properties, with composite reliability values of .913–.929 and average variance extracted values of .723–.766. Each hypothesised compliance driver had a positive coefficient. Tax compliance strongly predicted revenue mobilisation (β = .526, p < .001), revenue mobilisation predicted infrastructural development (β = .453, p < .001), and transparency strengthened that relationship (β = .152, p < .001). The model accounted for 42.6% of the variance in infrastructural development. Taken together, the results illustrate why legal reform cannot operate in isolation: clear rules, dependable digital systems, credible and fair enforcement, practical taxpayer assistance and transparent public spending must function as parts of the same fiscal-governance chain. The policy implications therefore centre on clearer reform communication, stronger tax technology, fair enforcement, transparent reporting of infrastructure expenditure and independent scrutiny of public spending.