Public Governance Quality and Tax Compliance of SMEs in North-East Nigeria

The study investigates the relationship between public governance quality (PGQ) indicators and tax compliance among Small and Medium Enterprises (SMEs) in Northeast Nigeria. The research examines six PGQ dimensions government effectiveness, rule of law, control of corruption, political stability, regulatory quality, and voice and accountability as determinants of SMEs’ tax compliance behavior. A quantitative survey design was adopted, with data collected from 140 owner-managers of registered SMEs using cluster sampling. Partial Least Squares Structural Equation Modeling (PLS-SEM) was employed to analyze the data. The findings reveal that government effectiveness, rule of law, and regulatory quality exert a positive and significant influence on SMEs’ tax compliance, while control of corruption and voice and accountability show significant negative relationships. Political stability indicated a positive but statistically insignificant relationship. The results underscore the importance of effective institutions, credible legal systems, and sound regulatory frameworks in enhancing tax compliance among SMEs, suggesting that effective institutions, fair enforcement, and transparent regulations foster compliance, whereas poorly perceived anti-corruption efforts and accountability mechanisms may undermine it. The study recommends strengthening institutional trust, simplifying regulatory frameworks, and ensuring transparent governance practices to enhance SMEs’ voluntary tax compliance and broaden the revenue base for sustainable development.