Determinants of Tax Compliance in Ghana:

Abstract

The study examined the factors that influence tax compliance by small and medium tax payers, the difference in the level of compliance between small and medium tax payers and strategies to improve tax compliance in Ghana. The study through stratified sampling technique sampled 100 small and medium tax payers in Accra and other GRA officials for the study. Data was analyzed qualitatively and quantitatively. The results of the study showed that compliance cost, tax rates, tax audits and morals of taxpayers significantly influenced tax compliance. The GRA also indicated that unions and associations of businesses could help increase voluntary tax compliance of small and medium tax payers in Ghana. The study findings provide evidence that there is a significance difference in the tax compliance level between small and medium scale enterprises. The difference can be largely attributed to the inability of small enterprises to file their tax returns on due dates and also to keep proper books of records of their business transactions. The study recommends organizing workshops for businesses to train them on the need to pay their taxes and keep proper records of their transactions, increasing the rate of audits of businesses, imposing fines and penalties for defaulting businesses.

Tax Administration, Tax Incentive and SMEs’ Growth: The Moderating Effect of Firms Size

“…Firm size is a significant factor that influences the effect of tax administration's influence on SMEs' growth in Ghana. This supports the position held by a recent empirical study by (Okpeyo, Musah and Gakpetor (2019). Given the significant interactive effect of firm size, the study further proves that medium enterprises have higher likelihood to pay taxes, compared to small-sized enterprises in Ghana.…”

“…Therefore, co-ordination cost incurred on all information processing necessary to co-ordinate the work of tax authorities and that of SMEs are more likely to favour mediumsized enterprises than small enterprises. This position is also championed by some empirical studies (e.g., Okpeyo, Musah & Gakpetor, 2019;Ocheni & Gemade, 2015;Stella, et al, 2014). Comparatively, medium enterprises have greater growth potential within the current tax system operating in Ghana, compared to small enterprises, although the magnitude of the difference is moderate.…”

“…Contrary to these claims, Dunne and Hughes (1994) found that small grow faster than large firms. However, Okpeyo et al (2019) found that medium enterprises pay taxes more than small enterprises. Hendricks, Amit and Whistler (1997) further disclosed that medium enterprises pay higher taxes compared to small firms.…”

“…For instance, Mukhlis and Simanjuntak (2016) found low tax compliance behaviour among SMEs. Elsewhere in Greater Accra, Okpeyo, Musah and Gakpetor (2019) found that tax compliance is higher among medium enterprises than small firms. Others also believe small firms bear higher tax compliance costs than larger companies hence having higher default risk of non-payment (Atawodi & Ojeka, 2012;Lokhande, 2020).…”

“…Firm size is a significant determinant of tax compliance (Yusof, Ling & Wah, 2014). Medium enterprises pay taxes than small enterprises (Okpeyo, Musah & Gakpetor, 2019). Medium enterprises paid higher taxes compared to small enterprises (Hendricks, Amit & Whistler, 1997).…”