Tax sanctions, tax reform factors, and SME compliance in Ghana

Isaac Nyame and Sampson Afrifa Jnr
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Isaac Nyame: Ikern Institute of Tax Policy and Research
Sampson Afrifa Jnr: Ikern Institute of Tax Policy and Research

International Journal of Research in Business and Social Science (2147-4478), 2025, vol. 14, issue 7, 409-422

Abstract: This study examined the moderating effect of tax sanctions on the relationships between tax reform factors (knowledge in tax laws, tax rights, tax business income) and tax compliance among SMEs in Ghana. The study adopted quantitative research design. Stratified random sampling technique was deployed in the selection of two hundred and fifty-two (252) SMEs in Accra. Data collection was done using questionnaires and analyzed using Partial Least Squares Structural Equation Modelling. The study found that significant positive relationships exist between tax business income factors (knowledge in tax laws, tax rights, tax business income) and tax compliance among SMEs in Ghana. The study also found that tax sanctions negatively moderate the relationship between knowledge in tax laws and tax compliance as well as tax business income and tax compliance. Tax sanction was found to positively moderate the relationship between knowledge in tax rights and tax compliance among SMEs. The study recommended the need for continuous tax education by tax authorities to enhance tax knowledge among SMEs, which has positive implications on tax compliance. The study further recommended that, rather than relying solely on tax sanctions, the Ghana Revenue Authority (GRA) should explore positive reinforcement mechanisms to encourage voluntary compliance. Offering tax rebates for timely compliance, such as discounts for businesses that consistently meet their tax obligations, can serve as an incentive. Finally, improving perceptions of tax fairness by clearly communicating how tax revenues benefit businesses and society may further enhance tax compliance among SMEs. Key Words: Knowledge of Tax Laws; Tax Rights; Tax Business Income; Tax Compliance; Tax Sanctions

Date: 2025
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