COMPLIANCE BURDEN AND TAX GAP AMONG MICRO AND SMALL SIZE BUSINESSES IN GHANA
Date
2021-03-02
Authors
AVORKPO, ERIC ATSU
Journal Title
Journal ISSN
Volume Title
Publisher
UNIVERSITY OF CAPE COAST
Abstract
Developing an efficient and effective tax policy is not a guarantee for reducing
revenue loss but a concerted effort of the taxpayers and the revenue mobilization
agency to ensure high level of compliance without having to increase the cost of
collecting these revenues and without imposing much compliance burden on the
taxpayer. This study investigates the compliance burden and tax gap of Micro and
Small Enterprises (MSEs) in Ghana. It specifically focuses on how compliance
burden affects the tax gap (Revenue loss) as well as the correlates of compliance
burden. Data on 485 registered MSEs taxpayers collected by the Directorate of
Research Innovation and Consultancy (DRIC) was used for the study. A t-test was
conducted whiles OLS was employed to examine the effect of compliance burden
on the tax gap as well as the correlates of compliance burden. It was found that
small enterprises underpay tax while micro enterprises overpay tax. The
compliance burden significantly increases the tax gap. Tax audit, number of taxes,
tax knowledge, distance to the tax office, and the kind of service used in preparing
and filing returns were found to have significant effects on compliance burden in
Ghana. The key policy recommendation is that Ghana Revenue Authority (GRA)
should intensify its tax auditing work to reduce the compliance burden and build
more offices to reduce the distance covered by MSEs when visiting the tax office
to make tax payment or seek advice.