Assessing the Tax Compliance Behaviour of Small and Medium Enterprises in Ghana

Abstract

SMEs play crucial role in the economic development of a country. Their role with regards to employment creation, production, and contribution to Gross Domestic Products are overwhelming. They are also the bedrock and conduit for all multinational businesses dominating their industry today. SMEs are therefore potentially, government main source of income through effective and efficient taxation system. There are chronicle of tax literature on tax compliance behaviour of SMEs as an attempt of understanding SMEs and how to properly tax them. Results of research in Ghana found a low tax compliance level among SMEs in Ghana (Acheampong, Debrah & Yeboah, 2016). More worrisome is the fact that Bedi (2016) found a weak impact of tax audit on tax compliance behaviour in Ghana. Results of these researches are inconclusive, necessitating the need for more researches in the quest to understand tax compliance behaviours of SMEs. This study therefore assessed the tax compliance behaviour of SMEs in Ghana. In achieving the objectives of the study, the researcher adopted the mixed study approach. A combination of closed ended scale-like and open ended questionnaires were administered. Analysis of data from field suggested that most SMEs agreed it was not an acceptable practice to overstate your expenses during computing your tax returns with the sole aim of reporting lower tax liability. Also, majority of respondents agreed that monies paid as taxes could have been used to expand their businesses; hence they would not pay taxes if it were voluntary. The study also found three main forms of tax compliance behaviour in Ghana namely; loyal compliance, defensive compliance, and social compliance. Furthermore, majority of respondents perceived our tax rates to be high, our tax system is complex and nontransparent, as well as lack equity and fairness. University of Ghana http://ugspace.ug.edu.gh xiii The study highlighted and suggested many issues to many stakeholders as contribution. To the government, the tax policy maker, it has been recommended to equip the NBSSI to assist SMEs file their tax returns for free. Also, GRA should institute regular tax education, frequent surveillance and auditing of SMEs as well as apply severe sanctions and penalties for tax non-compliance. Again, GRA is also recommended to ensure the strict enforcement of the TIN Act of Ghana, ACT 632 (2000) which would broaden and widen the tax base. The study also contributed to the academia by offering a unique insights on tax compliance behaviour among SMEs in small developing country As tax information is always sensitive to every businessman, this have affected their willingness to disclose their true turnover level as most of the respondents have chosen the lowest turnover scale as their turnover, this been the main limitation of the study.