Determinants of tax evasion among SMEs in Bolgatanga Municipal Assembly.

Abstract

Taxation is the major source of revenue to support the execution of government developmental projects. In Ghana, one major sector where more taxes could have collected is the Small and Medium Scale Enterprises (SMEs) of the informal sector. The sector contributes about 80% to the employment in the country (Ghana living Standard Survey - GLSS, 2010); but, its contribution in terms of tax revenue, relative to its size, is just a drop in the national coffers. The research, therefore, aimed at finding out why SMEs in the Bolgatanga Municipality evade tax. To achieve the objectives of the study, the survey method was adopted and a questionnaire was designed and administered to a sample size of three hundred and nine (309), comprising three hundred and four (304) tax payers and five (5) tax officials in the Bolgatanga Municipality. The study concluded that tax evasion rate among SMEs in the municipality was at the high side. Key reasons for this phenomena was attributed to low coverage in terms of tax education, high tax rates, large size of the tax district, large size of the informal sector in the municipality coupled with inadequate human and logistical challenges facing the GRA Office. Measures such as intensification of tax education, regular monitoring, capacity building, provision of adequate logistics, Creation of Zonal Offices, among others were recommended as means of reducing tax evasion and challenges of taxing SMEs in the Bolgatanga Municipality.