Publication Details
Abstract
Tax revenue is a critical source of government funding, particularly in petroleum-rich economies like Nigeria. However, the efficiency of tax collection in the petroleum sector is often hindered by tax evasion, weak compliance mechanisms, and inefficiencies in tax audit practices. This study examines the impact of tax audit detection, tax audit files, tax compliance in Nigeria over the period of 2011 to 2023. Using an ex-post facto research design and secondary data from the Federal Inland Revenue Service and the Nigerian Bureau of Statistics, the study employs the Autoregressive Distributed Lag model to assess the long-run and short-run relationships between tax audit practices and petroleum sector revenue generation. The results indicate a significant positive relationship between tax audit detection and petroleum profit tax, demonstrating that effective monitoring discourages tax evasion and enhances revenue collection. Additionally, the study finds that a higher percentage of completed tax audits relative to expected audits leads to improved tax revenue, highlighting the importance of audit effectiveness. Tax compliance exerts the strongest influence on petroleum profit tax, underscoring the need for policies that encourage voluntary tax adherence. Furthermore, government investment in tax technology, including e-filing, artificial intelligence audits, and blockchain solutions, significantly enhances petroleum tax revenue by improving transparency and efficiency in tax administration. The findings align with the tax compliance theory, reinforcing the notion that strict enforcement and technological advancements improve revenue outcomes. Based on the results, the study recommends strengthening tax audit frameworks, increasing compliance initiatives, and expanding digital innovations in tax collection to maximize petroleum sector revenue. These measures will not only improve tax efficiency but also enhance Nigeria’s fiscal sustainability and economic development.