The Influence of Tax Knowledge on Tax Payment Compliance in the Informal SME Sector of Ghana

Abstract

The study investigated the influence of tax knowledge on tax payment compliance in the informal SME sector of Ghana. Specifically, the study looked at the statistically significance effect between (1) Procedural Tax Knowledge and payment tax compliance among SMEs in the informal sector in Ghana, (2) legal Tax Knowledge and payment tax compliance among SMEs in the informal sector in Ghana and (3) general Tax Knowledge and payment tax compliance among SMEs in the informal sector in Ghana. To achieve the objectives, the study collected data from 584 informal SMEs operating in the Greater Accra Region. The study employed correlation and multiple regression analyses to establish the relationship between the dependent variable and the independent variables. The study found a statistically significant positive effect between Procedural Tax Knowledge and Payment Tax Compliance among SMEs in the informal sector in Ghana (B=0.377, P=0.000). The study also found a statistically significant positive effect between legal Tax Knowledge and Payment Tax Compliance among SMEs in the informal sector in Ghana (B=0.169, P=0.000). The study finally found a statistically significant positive effect between general Tax Knowledge and Payment Tax Compliance among SMEs in the informal sector in Ghana (B=0.273, P=0.000). The study provided tailored recommendations for policy directions in the informal SME sector.