Tax compliance in Ghana: Does Corruption and Trust in the Government matter?
Published in SN Social Sciences, 2023
Abstract
Government revenue serves as a financial foundation of economic growth. However, governments are unable to mobilize adequate tax revenue because of tax non-compliance. Previous research indicates that both economic and non-economic factors influence the tax payment propensity. Our study focuses on non-economic factors because it offers a better explanation of tax non-compliance than the pure economic factors. The study draws data from Ghana’s Afrobarometer Round 6, 7 and 8 surveys, and uses the probit mediation model to estimate the effect of trust in the government and government corruption level on tax payment propensity in Ghana. We found that trust increases the likelihood of tax compliance by 5.4% point, and high level of corruption indirectly reduces tax compliance by 1.0% point, through the decline in the trust in government. As regards, the locality disaggregated estimations found a significant positive effect for both trust in government and low corruption on tax payment propensity for rural taxpayers, whereas the urban taxpayer’s compliance propensity is not dependent on their trust in government or level of corruption.
Recommended citation: Nyarkpoh, M.K., Turkson, D., & Buaka, E.S. (2023). Tax compliance in Ghana: does corruption and trust in the government matter? SN Social Sciences, 3 (155): 1-18.
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