The complaince level among the trader population in Ghana: a case study of the Vat Service in the Greater Accra Region

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The Value Added Tax Service is one of the three agencies of the government that is tasked with the mobilization of revenue for the government. At the beginning of each year, the Service is given a target by the government to collect. The Service has consistently been exceeding its target creating the impression that government revenue expectations have been met. However given the, fact that government relies on about fifty (50%) percent of donor inflows to meet its budget expenditure, the picture is clear then that internal revenue generation is insufficient and must be stepped up. There is the need for the Revenue Agencies including the VAT Service to improve their revenue mobilization. However, the Service has been cautious when it comes to the issue of target setting. The main reason responsible for the modest target setting by the Service is the non compliant nature of the trader population (i.e. tax payers registered by the VAT Service to collect the Value Added Tax (VAT) on its behalf). The Service is faced with the problem of how to get the taxpayers to increase their compliance level. The reason being that if the compliance level is high, revenue targets will be increased and government revenue will be increased and over reliance on donor inflows will be minimized. The object of this paper therefore was to determine the reason for low compliance and come up with appropriate measures to solve it. Employing data collected from the staff of the VAT Service and the trader population, the study revealed: that the tax rate is quite high, traders’ knowledge of tax and related issues are limited due to inadequate education on the part of the VAT Service and the registered traders who collect the tax on behalf of government feel cheated by the fact that others do not do the same. On the part of the staff, they also thought that education of the taxpayers was problematic whilst their main issue was the fact the staff were not motivated enough to carry out the objectives of the Service. Based on the findings that came out of the study, a number of recommendations were made to improve compliance among the taxpayers. These include stepping up education of the taxpayers, registration of the unregistered traders, bringing the Service closer to the trader population as well as marketing the Service to the taxpayer in a manner that will help them improve their compliance. The study also recommended improved motivational measures for the staff as well.
A thesis submitted to the College of Arts and Social Sciences in partial fulfilment of the requirements for the award of MBA, 2008