INCOME TAX COMPLIANCE UNDER THE TAX STAMP SYSTEM: A STUDY OF SMALL SCALE ENTERPRISES IN THE ACCRA METROPOLIS, GHANA

Abstract

The study investigated income tax compliance of Small Scale Enterprises (SSEs) under the Tax Stamp System (TSS) in Ghana. Using SSEs in Greater Accra Metropolis of Ghana, the study employed a concurrent triangulation mixed methods design. Consequently, the study sampled 400 operators/managers of SSEs and the two zonal heads of Domestic Tax Revenue Division (DTRD) of Ghana Revenue Authority (GRA) in charge of TSS in the Metropolis. The zonal heads were selected purposively while the operators/managers were selected randomly using stratified random sampling technique. Questionnaire, with reliability co-efficient of .798, and an interview guide were the instruments used to collect the data. The data were analysed using frequencies, percentages and means. It was revealed that operators/managers of SSEs are familiar and are aware of TSS in the Metropolis. However, the most important reason why majority of the operators/managers purchase the tax stamp was because of its mandatory nature by law, even though, the operators/managers find it difficult to comply fully with the tax stamp system. Also, it was revealed that paying tax fines and penalties, understanding of the tax laws, positive government image, positive peer attitude, low compliance cost, and justice in the tax system are factors that influenced SSE operators to comply with the tax stamp law requirements. It is recommended that management of DTRD of GRA should assume that majority of the SSE operators are good citizens and would be willing to comply if they understood the tax system and are helped to comply. It should, however, be made known that if the trust of the service is breached, it will evoke its punitive measures. On this basis, sanctions must be preserved in income tax (TSS) laws as the last resort in enforcing compliance. The government could make this as a precondition for renewal of company licenses and for acquiring loans/other banking services in the country.