INVESTIGATING THE ANTECEDENT OF LOW PAYMENT OF TAX IN GHANA EMPIRICAL EVIDENCE FROM EFUTU MUNICIPALITY

Abstract

This research was conducted to provide an insight into the debate in Ghana – a developing country: the antecedent of low payment of tax in Ghana. Survey responses from questionnaires administered to operators of SMEs in Efutu, were quantitatively analysed. Both descriptive and inferential statistics were applied. The results indicated that, individuals are highly concerned with the amount of taxes they pay. The rates of income taxes in Ghana are generally perceived to be high. Furthermore, the low income earning affects low tax payment, low tax payment affect the economy of Ghana and the strategies in tracking revenue in Ghana Individuals have little regard for the amount of taxes paid by them in comparison to amounts paid by higher income earners. A significant positive statistical relationship (R=0.72) was found to exist between levels of low income earning and low tax pay

Chapter one

Introduction

1.1Background of the study

Tax revenues are the major source of income for governments in financing public services as well as stimulating the economic growth of most developing countries. In recent times, there have been growing concerns by taxpayers on the rapid surge in tax rates aimed at financing public debts and public services yet taxpayers seem not to reap the benefit attached to complying with taxes thus encouraging noncompliant behaviors from taxpayers. Noncompliant tax intentions leading to tax evasion renders a recess in the economic growth of most developing and emerging economies. Noncompliant behaviors mainly due to unfairness in tax systems in most countries have caused a rise in the number of persons engaging in the underground economic thus posing incessant detrimental effect on the economic growth of both developing and emerging economies. Despite numerous researches in calculating the actual size of the underground economy, such calculations have been futile on the basis that such calculations are only based on estimates. Due to this, most governments in developing countries are relentlessly putting out strategies to either eradicate or reduce the size of the underground economy to an appreciable level yet the underground economy is swelling in most developing countries. Most taxpayers’ exploits various loopholes in tax systems by employing techniques with the support of tax administrators thereby hindering the economic growth of most countries (
Ameyaw, B., et al. (2015) 

Tax evasion affects various sectors of an economy and heaps adverse effect on an economy as a whole. Evasion of taxes tempers on the accuracy of microeconomic statistics thus leading to the misallocation of resources needed to stimulate the growth of an economy. Additionally, the evasion of taxes alters the distribution of income in an arbitrary and erratic way Muhammed, M.M. and Muhanimed, A. (2012).  Increment in the propensity to evade taxes renders most governments unable to deliver it obligations and responsibilities in terms of improvement in standard of living to its citizens. Several countries have experienced loss in tax revenues due to tax evasion (Alm, J. (2013) The United Kingdom estimates loss in tax revenues to be $21 billion per year, Greece estimates showed loss in tax revenues to be $30 billion per year. In developing countries, overall tax revenues loss due to tax evasion is estimated to $285 billion per year. The noncompliant behaviors of citizens have forced most governments in raising tax revenues thereby heaping most burdens on individuals with favorable compliance behaviors. However, increment in such burdens towards the few citizens complying to taxes may not be economically viable on the basis of moral issues as well as social and cultural characteristics ( Daley, S. (2010)

Statement of the problem

Governments’ annual budget and development plans have seemed to be sluggish due to tax evasion behaviors of taxpayers. A research from shows the top ten countries severely affected by the low payment of taxes as well as tax evasion across continents. the continent mostly affected by the percentage of tax evasion to GDP is South America. With reference to: the country severely affected by low payment of tax is Brazil because the tax evasion to GDP ratio is higher than the ten countries reported.

In Ghana, one of the many problems facing tax administration is tax low payment of tax. Low payment of tax is rampant due to lack of appropriate monitoring strategies in tracking tax revenues from tax officials and taxpayers. Several media platforms in Ghana headlines tax evasion as a massive hit in the Ghanaian economic. Based on this the researcher wants to investigate the antecedent of low payment of tax in Ghana: empirical evidence from Efutu municipality

Objective of the study

The objectives of the study are;

1. To ascertain the effect of personal income on low payment of tax in Ghana
2. To find the effect on low tax payment on Ghana economy
3. To find out the strategies in tracking tax revenue in Ghana

Research hypotheses

The following research hypotheses were formulated;

H0: there is no effect of personal income on low payment of tax in Ghana

H1: there is effect of personal income on low payment of tax in Ghana

H0: there is no effect on low tax payment on Ghana economy

H2: there is effect on low tax payment on Ghana economy

H0: there are no strategies in tracking tax revenue in Ghana

H3: there are strategies in tracking tax revenue in Ghana

Significance of the study

The study will be very significant to students and the government of Ghana. The study will give a clear insight on the antecedent of low payment of tax in Ghana empirical evidence. The low payment of tax is cause by tax evasion which is illegal non-payment or under-payment of taxes, usually by deliberately making a false declaration or no declaration to tax authorities such as by declaring less income, profits or gains than the amounts actually earned, or by overstating deductions. It entails criminal or civil legal penalties. The study will help encourage government of Ghana to legalize penalty for nonpayment for boosting of country economy. The study will also serve as a reference to other researcher that will embark on the related topic

Scope of the study

The scope of the study covers the antecedent of low payment of tax in Ghana empirical evidence. The study will get data/information from Ghana revenue authority

Limitation of the study

Financial constraint: Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).

Time constraint: The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.

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