INCOME TAX EVATION AND ITS EFFECTS ON THE ECONOMY

Abstract

The modern view of taxation stems from the common premises that no one can be an island for him or herself. In 1996, Moses, Williams and Salter defined tax as a compulsory levy collected by the government to fund public expenditure. The researcher’s purpose to this study is to delve into income tax and why income earners like traders evade income tax. The main objectives of the study are to examine why people evade income tax payment. Also the researcher intend to examine the effect income tax evasion has on the economy and the problems that tax administration faces in an attempt to mobilize tax revenue from traders in Adum-Kumasi and offer solutions with suitable suggestions and recommendations. For the purpose of convenience, Kumasi Metropolis was chosen as the study area. Respondents for this study shall be traders within Adum market area and GRA (Domestic Tax). Forty Traders and Ten GRA Official were targeted. Ten personals were also interviewed using a random sampling technique. Questionnaires were the major instrument used for data collection. The study was to find out the problem connected with income tax evasion on the economy. The research revealed many problems on individuals’ attitude towards income tax. It was found out that their educational background were low. This was especially in the case of traders. Most of them were basic and secondary school leavers who had no in-depth education in taxes. Also, it was observed that the traders did not keep proper records, which makes it difficult to ascertain their correct and actual assessable incomes.