Tax Audits, Penalties, Enforcements, and Tax Compliance Among Small Retail Firms
DOI:
https://doi.org/10.61194/ijtc.v6i4.1946Keywords:
Audit, Tax, Compliance, Penalty, EvasionAbstract
A major problem in developing countries, including Ghana, is the high rate of tax evasion. This has adverse implications for development as the government largely relies on tax revenue for embarking upon national developmental activities. There is therefore a need to explore avenues to prevent tax evasion and increase tax revenue by adopting measures that promote tax compliance. This study examined the effect of tax audits, firm knowledge, and tax penalty enforcement on tax compliance among firms in the Kumasi Metropolis in Ghana. The quantitative research approach was adopted. A sample of 50 firms was randomly selected. A logit multivariate regression technique was employed to analyze data. In relation to firm size, the study finds that tax audit, the firm’s knowledge and awareness of tax penalties, and the enforcement of tax penalties are positively related to tax compliance. The study therefore recommends that tax authorities increase tax auditing activities, disseminate more information on tax penalties, and enforce these penalties effectively. Through education, auditing, and enforcement of tax penalties, tax evasion could be reduced.
References
Ali, M., Fjeldstad, O.-H., & Shifa, A. B. (2022). Tax compliance and the role of enforcement mechanisms in developing economies. World Development, 153, 105806. https://doi.org/10.1016/j.worlddev.2022.105806
Amegashie, J. A., & Dzahene-Quarshie, J. (2023). Enforcement intensity and taxpayer behavior in Ghana: Evidence from micro-enterprises. Journal of African Business, 24(2), 250–269. https://doi.org/10.1080/15228916.2023.2176489
Ameyaw, B., & Dzaka, D. (2016). Determinants of tax evasion: Empirical evidence from Ghana. Modern Economy, 7(14), 1653–1664. https://doi.org/10.4236/me.2016.714145
Amoh, J. K., Ofori-Boateng, K., Nsor-Ambala, R., & Anarfo, E. B. (2023). Revisiting the tax evasion and corruption–economic development nexus in Ghana: Fresh evidence from a SEM approach. Journal of Economic and Administrative Sciences. https://doi.org/10.1108/JEAS-01-2023-0020
Atta Peprah, J., Kwaw Andoh, F., Avorkpo, E. A., Nkansah Dafor, K., Afful, B., & Obeng, C. K. (2022). Compliance burden and tax gap among micro and small businesses: Evidence from Ghana. SAGE Open, 12(4), 1–17. https://doi.org/10.1177/21582440221126985
Baba, S. (2022). The effects of economic factors on tax compliance by small and medium enterprises of Tamale Metropolis in Ghana. Asian Journal of Economics, Business and Accounting, 22(15), 44–53. https://doi.org/10.9734/ajeba/2022/v22i1530617
Becker, W., Büchner, H. J., & Sleeking, S. (1987). The impact of public transfer expenditures on tax evasion: An experimental approach. Journal of Public Economics, 34(2), 243–252. https://doi.org/10.1016/0047-2727(87)90055-2
Bedi, I. (2016). The influence of tax audit on tax compliance in Ghana. International Journal of Management Practice, 9(2), 132–141.
Bergman, M. (1998). Criminal law and tax compliance in Argentina: Testing the limits of deterrence. International Journal of the Sociology of Law, 26(1), 55–74. https://doi.org/10.1006/ijsl.1998.0061
Beron, K. J., Tauchen, H. V, & Witte, A. D. (1988). A structural equation model for tax compliance and auditing.
Brooks, N. (2001). Key issues in income tax: Challenges of tax administration and compliance.
Bruce-Twum, E. (2023). SMEs’ tax compliance behaviour in emerging economies: Do tax compliance costs matter? Evidence from Ghana. Journal of Accounting, Ethics & Public Policy, 24(2), 27–49.
Butler, C. (1993). Self-assessment: The way forward. Tax Nasional, 1(2–3), 2–3.
Chau, K. K. G., & Leung, P. (2009). A critical review of the Fischer tax compliance model: A research synthesis. Journal of Accounting and Taxation, 1(2), 34–40.
Chepkurui, C., Namusonge, G., Oteki, E., & Ezekiel, C. (2014). Factors affecting tax compliance among small and medium enterprises in Kenya. International Journal of Recent Research in Commerce, Economics and Management, 1(3), 60–65.
Cobham, A. (2005). Tax evasion, tax avoidance, and development finance. Queen Elizabeth House Working Paper Series, 129, 1–19.
Devos, K. (2008). Tax evasion behaviour and demographic factors: An exploratory study in Australia. Revenue Law Journal, 18(1), 1–23.
Drummond, P., Daal, W., Srivastava, N., & Oliveira, L. (2012). Mobilizing revenue in Sub-Saharan Africa: Empirical norms and key determinants. IMF Working Paper Series, WP/12/108.
Dubin, J. A. (2004). The causes and consequences of income tax noncompliance. Springer Science and Business Media.
Fischer, C. M., Wartick, M., & Mark, M. M. (1992). Detection probability and taxpayer compliance: A review of the literature. Journal of Accounting Literature, 11, 1–46.
Gordon, R. H. (1990). Effects of the Tax Reform Act of 1986 on corporate financial policy and organizational form. National Bureau of Economic Research Working Paper, w3222. https://doi.org/10.3386/w3222
Harrison McKnight, D. (2002). The impact of initial consumer trust on intentions to transact with a web site: a trust building model. The Journal of Strategic Information Systems, 11(3–4), 297–323. https://doi.org/10.1016/S0963-8687(02)00020-3
Iyer, G. S., Reckers, P. M., & Sanders, D. L. (2010). Increasing tax compliance in Washington State: A field experiment. National Tax Journal, 63(1), 7–32. https://doi.org/10.17310/ntj.2010.1.01
McKnight, D. H., Choudhury, V., & Kacmar, C. (2002). Developing and Validating Trust Measures for e-Commerce: An Integrative Typology. Information Systems Research, 13(3), 334–359. https://doi.org/10.1287/isre.13.3.334.81
Oduro, R., Asiedu, A. M., & Tackie, G. (2018). Determinants of tax evasion in the developing economies: A structural equation model approach of the case of Ghana. Journal of Accounting and Taxation, 10(4), 37–47. https://doi.org/10.5897/JAT2017.0285
Okello, A. (2019). Managing small business tax compliance: Evidence from Sub-Saharan Africa. African Tax Research Network Working Paper, 18(3), 1–25.
Organisation for Economic Co-operation, & Development. (2021). Tax administration: Comparative information on OECD and other advanced and emerging economies 2021. OECD Publishing. https://doi.org/10.1787/5d8d0f13-en
Pennanen, K., Tiainen, T., & Luomala, H. T. (2007). A qualitative exploration of a consumer’s value-based e-trust building process: A framework development. Qualitative Market Research An International Journal, 10(1), 28–47. https://doi.org/10.1108/13522750710720387
Torgler, B., & Schneider, F. (2020). Shadow economy, tax morale, and institutional quality: A panel analysis of 150 countries. Journal of Economic Psychology, 79, 102259. https://doi.org/10.1016/j.joep.2020.102259
Zubairu, I., Atiawin, P. A., & Iddrisu, A. J. (2025). Examining how digitalization affects tax compliance in Ghana using structural equation modelling (SEM). International Journal of Business and Economics Research, 14(1), 1–25. https://doi.org/10.11648/j.ijber.20251401.11
Downloads
Published
How to Cite
Issue
Section
License
This work is licensed under a Creative Commons Attribution 4.0 International License.
