Trade Associations Activities and Informal Sector Tax Compliance in South-West Nigeria

This study aims to examine the role of trade associations in enhancing tax compliance among informal sector operators in South-West Nigeria, focusing on their influence in promoting awareness, reducing financial barriers, and fostering trust to improve overall compliance rates. The research employed a descriptive survey design. The population consisted of informal business operators aged 18–64 years in Nigeria’s South-West region, specifically Lagos and Ogun states, selected due to their vibrant informal economies. The study utilized a purposive sampling technique to select a sample size of 180 participants. Data were collected using a structured questionnaire. The validity of the instrument was established through expert reviews, and reliability was confirmed with a Cronbach’s Alpha exceeding 0.7. Data analysis employed descriptive statistics and multiple regression using SPSS. The results shows that tax awareness and education strongly influence compliance, accounting for 13.5% of the variance (R² = 0.135; β = 0.367, p < 0.000), with 49.4% of respondents strongly agreeing to a clear understanding of their obligations (mean = 3.14). Financial constraints are a notable barrier, explaining 3.0% of the variance (R² = 0.030; β = 0.173, p < 0.020), with 50.6% strongly agreeing that financial challenges hinder compliance (mean = 3.11). Trust in trade association executives positively influences compliance, contributing 4.6% of the variance (R² = 0.046; β = 0.215, p < 0.004), as 48.9% strongly agreed they represent members' interests effectively (mean = 3.12). The findings highlight the significant influence of tax awareness, financial constraints, trust in trade associations, and government trust on tax compliance in the informal sector. The conclusion emphasizes that improving tax education, alleviating financial barriers, and strengthening trust in both trade associations and the government are essential for enhancing tax compliance in this sector. It is recommended to focus on accessible tax education, financial support, and transparency to foster greater compliance.