An investigation into tax compliance behavior of small and medium-sized enterprises in the kumasi Metropolis

Abstract

The purpose of the study was to examine the tax compliance behavior of ownermanagers of Small and Medium-sized Enterprises (SMEs). The study employed the survey design underpinned by the quantitative approach to research. The sample comprised 150 owner-managers of SMEs in the Kumasi Metropolis selected from three major sectors – manufacturing, trading and services using the stratified sampling technique. Data was collected using a questionnaire and analyzed using mean scores and standard deviations. The results show that the major acts of tax non-compliance committed by SMEs includedunderstatement of income, failure to file tax returns, and failure to pay taxes within the period required. It was found that majority of owner-managers of SMEs could not compute their tax liabilities and file their tax returns by themselves. Moreover, it was revealed that the factors that influence tax compliance behaviour of SMEs could be classified into four major categories – economic factors, social factors, institutional factors, and demographic factors. It was deduced from the findings that SMEs engage in various forms of tax non-compliance due to their limited knowledge in taxation and the seeming weaknesses in the tax administration system in terms of strict enforcement of tax laws and effective tax education. Hence, it was recommended that the Ghana Revenue Authority (GRA) should heighten its public tax education and awareness campaigns with the aim of encouraging positive tax morale among taxpayers