ASSESSMENT OF THE TAX STAMP STRATEGIES AND INCOME TAX COMPLIANCE AMONG PRIVATE ENTERPRISES IN GHANA

Abstract

Private enterprises occupy a significant position in the economic sphere of most countries both developed and developing. Most work forces are employed in these sectors and therefore most of the domestic income generated by way of taxes would have been expected from these sectors. To take advantage of this, government has over the years introduced a series of tax reforms, among which include the tax stamp for very small and micro enterprises (VSMEs). Although these reforms led to a significant increase in government revenue, its percentage to GDP was very low. The paper’s objective was to investigate how the tax stamp strategy has enhanced income tax compliance by micro-enterprises. It specifically assessed the performance of the Tax Stamp strategy in terms of revenue mobilization and the challenges confronting it. The methodology applied was the mixed method under the multiple methods choices which embraces the complementarities of both qualitative and quantitative techniques. The findings were that the tax stamp strategy has great potential in-terms of revenue mobilization. It increased income tax revenue from the Small and Micro Taxpayers (SMTs) in the informal sector by about 4 times (393%) for the period 2005 to 2013. Its introduction has made some tax payers’ become aware of their obligations under the tax law. Nonetheless some deficiencies in the implementation strategies did not effectively translate the awareness to compliance. The paper recommends that to improve the level of income tax compliance by the informal sector, a concerted, long-term, and well coordinated tutoring and enforcement plans should be developed and backed by all stakeholders with a high level of commitment aside from politics.