TAX KNOWLEDGE AND FILING OF TAX RETURNS BY SMALL AND MEDIUM ENTERPRISES IN THE TAMALE METROPOLIS OF GHANA

Abstract

Taxes play a significant role in the development of countries the world over. There are concerns that poor tax knowledge of SMEs in Tamale Metropolis is affecting the filing of tax returns. This has implications for local government revenue in the Tamale Metropolis. No study had been done on this problem which may be affecting the development of this Metropolis of Ghana. This study set out to assess the tax knowledge of owners of SMEs and filing of tax returns in the Tamale Metropolis. The Deterrence and Psychology theories on taxation were employed for the study. A descriptive research design was used to achieve the purpose of the research. Thirty (30) SMEs were chosen for empirical analysis. The study found that SME owners lack adequate tax knowledge about levels of taxable income, types of taxes their businesses are supposed to pay and payment dates. SME taxpayers' view on their level of tax knowledge was that it is inadequate to help them properly file their tax returns. The huge amount of paperwork to be completed in filing of tax returns compounds the problem of illiteracy and low level of education and prevents effective filing of' tax returns by owners of SMEs. The study concludes that, only a small segment of the SME community in Tamale Metropolis files tax returns. However, the study recommends that, the Ghana Revenue Authority (GRA) should carry out very intensive education on filing of tax returns. There is also the need for tax simplification to improve filing of tax returns by owners of SMEs.