article · SAGE Open
Understanding the drivers of voluntary tax compliance among small and medium enterprises can help developing economies boost revenue mobilisation and address budget deficits. An examination of 341 small and medium enterprises operating in Sekondi-Takoradi, Ghana, reveals that behavioural motivations and social factors heavily influence compliance decisions. Statistical analysis demonstrates that business owners' knowledge of the tax system, their trust in the government, and their perceptions of tax fairness all serve as significant predictors of voluntary compliance. Furthermore, the perceived fairness of the tax regime plays an essential mediating role in connecting tax knowledge to compliant behaviour. Rather than relying solely on enforcement, improving the clarity of tax rules, building institutional trust, and ensuring that the system is viewed as equitable are critical for revenue agencies seeking to improve domestic tax collection among smaller commercial enterprises.
Many developing economies face mounting public debt and fiscal deficits, making domestic revenue collection essential. Small and medium enterprises make up the majority of businesses, yet often exhibit low tax compliance. Showing that compliance is tied to trust, knowledge, and fairness helps tax authorities design policy interventions that encourage voluntary participation rather than relying strictly on costly enforcement measures.
The findings offer early-stage empirical insights relevant to revenue authorities, policy designers, and civic technology developers creating taxpayer education or compliance platforms. Public bodies could use these insights to design tailored taxpayer education programmes and communication tools for small enterprises. Because this is survey-based behavioural research, practical application remains at a policy-formulation stage and requires translation into operational interventions before direct real-world use.
AI-generated from the published abstract. Always read the original work before citing.
This paper examines whether tax knowledge, tax fairness and trust affect voluntary tax compliance among small and medium enterprises (SMEs). Given the growing budget deficits and debt levels of developing economies, we contend that an understanding of the factors associated with voluntary tax compliance among SMEs could enhance tax revenue mobilization. Although the majority of businesses are SMEs, questions about their tax compliance have become topical among stakeholders due to perceived low levels of compliance, hence, an investigation into the factors underlying their tax compliance behavior is critical for stakeholders, particularly governments and tax authorities. We used a survey-based approach to sample 341 SMEs operating within Ghana’s oil city of Secondi-Takoradi. We employed the structural equation modeling (SEM) technique to analyze the retrieved data. Generally, our empirical results indicate that social factors and behavioral motivations are key determinants of voluntary tax compliance among SMEs in Ghana. Specifically, our results suggest that SMEs’ perception of tax fairness, knowledge about the tax system, and trust in government are significant predictors of voluntary tax compliance. Additionally, we find a significant mediating role of tax fairness in the relationship between tax knowledge and voluntary tax compliance. As governments seek to raise tax revenues and manage public debt, our results provide important insights into social and behavioral factors that could aid in enhancing tax compliance.
This page summarises published work. The authoritative version sits with the publisher.
DOI: 10.1177/21582440241234757
Is something wrong with this record? Report it or request removal.
Discussion
Have you built on this work, tried to replicate it, or seen it applied in practice? Share what you know. Verified researchers and MARATTO™ domain experts can open a discussion, and any member can reply. Contributions are reviewed before they appear.
No discussion yet. Open the first thread.
New to MARATTO™? Create a free account.
