Compliance with income tax administration among micro, small and medium enterprises in Ghana

Abstract

In a developing country like Ghana, Micro, Small, and Medium Scale Enterprises (MSMEs) play an important role in the socioeconomic development of the economy. Payment of income tax by MSMEs remains one of the key sources of government revenue for development activities in Ghana. However, not much is known regarding the compliance of MSMEs with income tax administration in Ghana. Understanding income tax administration compliance and associated challenges among MSMEs could assist relevant policy actors in designing strategies to improve income tax administration in Ghana. Against this background, a mixed-method study involving 210 (200 MSMEs and 10 key informants) sample was conducted to examine the compliance of MSMEs with income tax administration in the Nkwanta South District of Ghana. The study revealed a lack of tax education, high tax rate, low level of income, and high household consumption levels as the dominant and influential factors to tax compliance among the MSMEs. The study further showed that challenges associated with tax administration include low institutional capacity, inadequate resources, negative public attitude towards tax payment, lack of collaboration between the tax agencies, and political interference. Based on these findings, it is important for policymakers and tax collection institutions to strengthen and streamline existing measures to ensure effective income tax administration in Ghana.

Strategies to Improve Taxpayers’ Compliance of Indonesian Micro Small and Medium Enterprises: PRISMA Approach

“…First, tax authorities must provide tax education and training to MSME business actors (Ababio & Mangueye, 2021;Al-Ttaffi et al, 2021;Bornman & Ramutumbu, 2019;Duy & Tran, 2021;Ghani et al, 2020;Le et al, 2021;Newman et al, 2018;Resmi et al, 2021;Peprah et al, 2020;Ullah et al, 2018;Wadesango & Nyamwanza, 2020) in the hope of increasing tax knowledge and compliance. Second, the tax authority must carry out modernization on an ongoing basis (Arendsen et al, 2014;Dickinson, 2013;Purnamasari & Sari, 2018;Purwono et al, 2021;Saeed et al, 2017;Widjaja, 2021) so that tax services become better, faster, and more accurate.…”

“…Third, the tax authority must apply the same sanctions to noncompliance taxpayers under applicable tax regulations (Alshira'h & Abdul-Jabbar, 2020;Poppelwell et al, 2012) so that taxpayers will accept the tax rules. Fourth, the tax authority needs to carry out tax reforms (Arendsen et al, 2014;Coolidge, 2012;Dickinson, 2013;Ghani et al, 2020;Joshi et al, 2014;Millane & Stewart, 2019;Miller, 2019;Peprah et al, 2020) so that the tax rules are fairer, more accessible, and more timely for taxpayers. Fifth, the tax authority and the government must increase public trust in the tax authority and the government to increase voluntary compliance (Kaplanoglou et al, 2016;Minh et al, (2021).…”

“…Resmi et al (2021) stated that MSME taxpayers need training in preparing financial reports and tax reporting procedures because after receiving training, they become more aware of the importance of financial statements and tax reports. Tax service digitization strategy (Arendsen et al, 2014;Purnamasari & Sari, 2018;Purwono et al, 2021;Widjaja, 2021), education strategy (Peprah et al, 2020), tax audit strategy (Alshira'h & Abdul-Jabbar, 2020), tax morale (Bornman & Ramutumbu, 2019;Ghani et al, 2020;Yücedogru & Hasseldine, 2016), government support strategy (Huong & Cuong, 2019), tax fairness system (Ullah et al, 2018), tax knowledge (Newman et al, 2018;Poppelwell et al, 2012), perception of corruption (Rosid et al, 2016), effective engagement strategy (Langham & Paulsen, 2015), and tax service (Rahmawati & Nasih, 2020) have a significant effect on MSME taxpayers' compliance.…”

A cohesive model of predicting tax evasion from the perspective of fraudulent financial reporting amongst small and medium sized enterprises

“…According to Kurauone et al (2021), the issues of tax evasion amongst SMEs have been escalated in Zimbabwe and the government is losing its revenue from this category of taxpayer. Meanwhile, factors affecting tax compliance amongst SMEs have been deliberated using evidence from Vietnam by Le et al (2020) and Peprah et al (2020) in Ghana; and Thabani and Richard (2020) in Zambia amongst others. Interestingly, according to Alshira’h and Abdul-Jabbar (2020), tax audit activities have a significant relationship with tax compliance amongst SMEs in Jordan.…”

Curbing Tax Evasion through Taxpayer Identification Number (TIN) in Niger State, Nigeria

“…Developing policies and strategies to combat tax evasion has thus been an important priority for governments around the world (Boolaky et al, 2018;Andoh et al, 2019). Typically these strategies involve attempts to improve the ability of tax authorities to discover tax evasion attempts (Peprah et al, 2020), increasing the severity of penalties for entities caught and convicted of evading taxes (Chiarini & Marzano, 2019) and attempts to improve voluntary tax compliance by citizens by increasing their tax knowledge and convincing them of the societal benefit of paying taxes (Amponsah et al, 2019).…”