Why information technology is constrained in tackling tax noncompliance in developing countries

Purpose: This study aims to investigate the reasons for the large scale tax noncompliance prevalent in underdeveloped countries despite many years of information technology (IT)-led tax administration reforms. Design/methodology/approach: The study is based on in-depth interviews with 18 senior tax administration officials. Their experiences were used to construct a grounded theory to explain the constraint of IT in tackling the prevalent tax noncompliance in underdeveloped countries. Findings: First, IT is not immune to the systemic corruption prevalent in many developing countries; hence, it is quickly compromised. Second, IT can be efficient in dealing with registered taxpayers but cannot deal with the overwhelming large numbers of operators in the informal sector. Third, E-tax administration, which is a hallmark of IT-led tax administrations in advanced countries, is very slow to catch up in developing countries. A computerized tax administration alone, as currently obtainable in developing countries, is not enough to engender large usage of e-filing. Businesses, especially small and medium-sized enterprises (SMEs), need IT infrastructure as well to align with tax administration. Unfortunately, basic IT infrastructure is yet to be available to a large section of SMEs in developing countries. Research limitations/implications: Underdeveloped countries are diverse. This study is from a single country and there may be need to take note of other countries’ peculiarities. However, Nigeria constitutes a good case study. Practical implications: There is need to reform the people and systems along with IT originality/value. Originality/value: To the authors’ knowledge, this study is the first to explore this very important question and among the first to explore tax administrators’ perspectives.