ABSTRACT
The study sought to first examine the levels of gift tax awareness and the level of compliance of gift tax among graduate non-accounting students in Ghana. The study also examined factors that influence gift tax compliance in Ghana and also factors that influence effectiveness of tax administration system in Ghana for gift tax. The study sampled 125 graduate non-accounting students from the University of Ghana. The study used descriptive statistics, charts and diagrams, ANOVA and well as regression analysis to achieve the objectives of the study.
The results showed low of gift tax awareness among graduate non-accounting students with none of the respondent ever paying taxes on their gifts even though majority admitted receiving gifts. Though the tax administrators perceive the awareness level to be high, the result of the study indicates otherwise.
Some of the reasons identified by the study for the low level of compliance with gift tax among Ghanaian taxpayers are: unawareness of gift tax obligations, those taxpayers who are aware do not feel obliged to pay; the non-enforcement by the tax officials; some taxpayers simply never receive taxable gifts; or the value of the gift is not above the exempt threshold.
The results also showed the gender, age and work experience affect gift tax compliance. Finally, on the effectiveness of gift tax administration system in Ghana, the study found that simplicity, equity, transparency and administrability were significant determinants of tax system effectiveness in Ghana. It is recommended based on the findings of the study that Ghana Revenue Authority intensifies tax education especially on the gifts tax obligations immediately, and puts in place measures to enforce such obligations.
CHAPTER ONE
INTRODUCTION
- Research background
In many ways the raising of tax revenues is the most central activity of any state. Most fundamentally, revenue from taxation is what literally sustains the existence of the state, providing the funding for everything from social programs to infrastructure investment. Taxation also plays an important role in shaping the distribution of benefits, as it is the basis for redistribution from those with the highest incomes to those most in need, and allows government to encourage certain activities and discourage others by altering their relative prices. In the realm of capacity, taxation lies at the administrative heart of government and provides the foundation for the provision of public goods and the implementation of effective regulation. As importantly, taxation is the venue through which citizens are most intimately connected to the state and can be an important catalyst for public demands for responsiveness and accountability (Ibrahim et al., 2015).
Tax revenue has also been found to be important in the fiscal illusion debates pioneered by Puviani (1903). The theory of Fiscal illusion suggests that when government revenues are not completely transparent or are not fully perceived by taxpayers, then the cost of government is seen to be less expensive than it actually is. Mauro’s (2010) original idea was that the aim of the ruling group is to design the taxation system so that the resistance of the dominated class is minimized. This means that tax revenue also sustains governments and may be more critical in less democratic societies. As a result, the rulers seek for answers to the question, “In order to minimize taxpayer resistance or unwillingness for any given level of revenues collected, how
should the fiscal system be organized?” (Mourão, 2010). Such a question heralds the importance attached to tax administration in the tax compliance equation. Researchers such as Armah-Attoh and Awal (2013) have indicated that the capacity of a country to provide for the welfare and security to its citizens, in addition to developing and consolidating a representative democracy is determined by its ability to raise enough resources through tax. Such voices suggest that effective mobilization of tax revenues from all economic agents increases public services and facilitates the achievement of the Millennium Development Goals in developing countries (Cerqueti and Coppier, 2009). The need for tax compliance is now even more elevated as Ritsatos (2014) indicates that the importance of tax compliance has increased dramatically with sovereign debt crisis in the global economic environment. This means that all revenue authorities (or governments) world over should strive to achieve a good tax compliance outcome as possible, that is, to maximize the overall level of compliance with the tax laws (Organisation for Economic Co-operation and Development (OECD), 2004). But, taxpayers’ behaviors and perceptions complicate the achievement of a good compliance outcome (OECD, 2004). In Ghana, for example, the achievement of a good compliance outcome has been elusive with consistent strikes and demonstration by traders and other taxpayers whenever there are proposals to improve tax revenue. Moreover, Mugabe and Kulabako’s (2016) quote Uganda Revenue Authority (URA) tax register as having only 882,000 taxpayers out of a working population of more than nine million and also report that only 11.7 percent is a contribution of tax to gross domestic product which is lower than Kenya’s 19.3 percent in East Africa. The Ghanaian media also consistently reports instances of smuggling, undervaluation and miss-description of imported goods, which actions are a negative element in realizing government tax revenue targets. According to Sanya and Mulondo (2015), URA wishes
to toughen on traders involved in tax crimes such as smuggling, undervaluation and miss- description. One of the measures Ghana Revenue Authority (GRA) has instituted is arrest of tax offenders, penalties for undervalue declaration and miss-declaration (Sanya and Mulondo, 2015). The stance from GRA suggests that there are widespread non-tax compliance behaviors among taxpayers in Ghana. Yet, quoting a URA commissioner, Sanya and Mulondo (2015) report that tax revenue in Uganda is used, among others, to build roads, schools and hospitals. Elsewhere, a study by Sikka and Willmott (2013) on the examination of the involvement of global accountancy firms in devising and selling tax avoidance schemes euphemistically marketed as tax planning suggests taxpayers’ readiness to devising schemes that reduce the tax take on business and thereby reducing the revenues required to provide and maintain public services.