Cashless Economy, Tax Evasion and the Behaviour of Self-Employed and Professionals in Nigeria

The study reports on whether a cashless economy is a panacea for reduction of tax evasion by the self-employed. It identifies probability of detection and tax penalties as concomitant variables based on the literature on tax evasion that may blur any impact, and proceed to test the impact of a cashless policy on tax evasion behaviour. A comparative group design, involving self-employed traders and professionals in independent practice, is adopted. A battery of test items developed to estimate probabilities of detection and tax evasion behaviour scores is packaged into a questionnaire and circulated to self-employed qualified to pay personal income tax. The result fails to reject the null hypothesis of no difference between tax evasion behaviour of the comparative groups. The conclusion, starkly drawn, is that tax evasion behaviour of the self-employed has reduced but the reduction cannot be entirely ascribed to the cashless policy, as taxpayers are unaware of the implication of the cashless policy on tax evasion. It is recommended that tax inspectors performing tax audit function should utilise third party information provided by banks to track noncompliant taxpayers.