WHY SME’S FAILS TO HONOUR THEIR TAX OBLIGATIONS (A CASE STUDY IN KUMASI METROPOLIS)

Abstract

This research was conducted to evaluate the factors contributing to tax evasion by SMEs and its effect on economic development of Kumasi metropolis. The aim was to assess the causes of tax evasion, the effects of tax evasion and the appropriate measures to put in place to encourage taxpayers to pay. This study was undertaken in the Kumasi metropolis, the administrative capital of the Ashanti region and the Ghana Revenue Authority office in particular; it is the second largest city in Ghana. We sampled 50 out of a total population size of 65 for the study. The researchers used questionnaires which were distributed to the traders and the officials of the Ghana Revenue Authority. Random sampling was used to select the respondents to answer the questions for the study. From the findings, it was revealed that tax evasion affects income generation, infrastructures in the society and economic growth. Tax evasion hampers the development of the economy. Tax evasion retards the provision of social amenities. Appropriate measures should be put in place to encourage taxpayers when due. The researchers therefore recommend that future researchers use other research methods such as focus groups and interview guides to gather information from SMEs and the Ghana Revenue Authority so as to enable them have a more concrete reasons for SMEs failure to oblige to their tax obligations.