Fairness Perceptions of The Income Tax Rate Structure Among Micro, Small, and Medium Enterprises in Ghana: A Proposal for An African Concept of Distributive Fairness

Abstract

This study examines the normative fairness or otherwise of the Ghanaian income tax rate structure in the context of the experiences of Micro, Small and Medium Enterprise, (MSME) taxpayers, and the principles of fair taxation. The study finds that MSME taxpayers perceive the Ghanaian income tax system as unfair, as the income taxes that they pay are too high and the way the taxes are collected is problematic. The study finds further that the factors underpinning the perceptions of unfairness are rate complexity, distributive unfairness, and procedural injustice. The study argues that the Ghanaian income tax rate structure is normatively unfair, its rate structure complexity is beyond the capacity of MSMEs to determine correctly, and the procedural requirement for disputing a tax assessment is also unfair to MSME taxpayers. The study makes recommendations for the harmonisation of the various definitions of MSMEs in the Ghanaian legal system, a practical progressive income tax rate structure founded in an African concept of distributive fairness, and a collaboration between the Ghana Revenue Authority and the Ghana Enterprises Agency for a holistic and comprehensive preferential tax regime that addresses the factors underpinning MSMEs perceptions of unfairness and builds the capacities of MSMEs to support them to thrive in the Ghanaian economy.