Examining the incidence of tax evasion amongst some selected groups in the informal sector in the Kumasi Metropolis

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November, 2015
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Taxation has been one of the principal sources of revenue to the government. Funds raised through taxation have been used by the state to finance its spending programmes. In spite of the benefits of taxes, their payment and collection has been a problem for the Ghana Revenue Authority particularly in the informal sector. In undertaking a study to look into the incidence of tax evasion in the informal sector, there was the need to choose a reasonable number of taxpayers to form the target population so that a concise research could be carried out with reasonable probability of success. In view of this, the researcher chose three hundred and seventy-eight operators in the informal sector. Stratified random sampling technique was used to administer the questionnaire. The researcher used his personal judgment to select artisans, drugstores, beauticians, petty traders, grocery stores, dressmakers and caterers. The views of Tax Officials were gathered through in-depth interviews. The research found that most of the businesses in the sector do not pay income tax due to the fact that they are not registered and lack permanent business location which makes it difficult to trace them. Again, most of the taxpayers in the sector carry out transactions on cash basis and do not file income tax to the tax authorities. From the research conducted, it could be concluded that the level of tax evasion in the sector is very high. It is therefore recommended that the GRA inform and educate the taxpaying public on the need to pay taxes and also simplify the filling of income tax returns process to ensure better understanding of the tax system by the operators. They should also organize training programmes for entrepreneurs to acquire basic financial accounting skills to help them keep records. Records should be computerized to keep track of businesses and tax administration should be improved to ensure extension of services to majority of operators in the informal sector.
A Thesis submitted to the Department of Accounting and Finance, Kwame Nkrumah University of Science and Technology in partial fulfillment of the requirements for the degree of Master of Business Administration (Accounting Option),