The Effect of Reliogiosity on Tax Morale in Developing Countries: Evidence from Ghana

Abstract

Tax revenue constitutes a chunk of revenue of many economies all over the world especially developing economies. Tax performance, however, appears far below the tax capacity of these countries. That raises the issue of tax morale. Many studies have been undertaken to explore the factors influencing tax morale. One factor found by these studies, though not conclusive, is the role of religiosity. In Ghana and other sub-Saharan African countries, an overwhelming majority of the populace are religious. Yet, tax revenues and as a share of gross domestic product (GDP) has seen steady decline over the years. The level of informality of many African countries negatively affects tax revenue mobilization. This current study sought to explore the effect of religiosity on tax morale in Ghana. The study found that, generally, religiosity positively correlates with the tax morale of Ghanaians. Specifically, the results indicate that religiosity, higher scale of income, employment status and educational level determine tax morale in Ghana. However, the high tax morale barely translates into actual performance given the fact that the country’s effort is far low compared against its middle-income level peers. The psychological phenomenon of cognitive dissonance which emphasizes the mismatch between people’s attitude and behaviour explains the finding. Useful recommendations are made to match tax compliance with tax morale.