TITLE:
Informal Sector Tax Compliance Issues and the Causality Nexus between Taxation and Economic Growth: Empirical Evidence from Ghana
AUTHORS:
Bismark Ameyaw, Amos Oppong, Lucille Aba Abruquah, Eric Ashalley
KEYWORDS:
Taxation, GDP, Granger Causality, Theory of Planned Behavior
JOURNAL NAME:
Modern Economy,
Vol.7 No.12,
November
17,
2016
ABSTRACT: Revenues generated from taxes constitute a major
source of income for governments. However, the epic display of tax evasion by
individuals and firms in most countries has induced researches on the factors
accounting for tax evasion in developing countries. Therefore, this study is
conducted to investigate the determinants of the informal sector compliance
issues and the causality nexus between tax evasion and Gross Domestic Product
(GDP). This research solely adopts the theory of planned behavior in analyzing
tax compliance issues. The research work is divided into two parts. In analyzing
the informal sector compliance issues, questionnaires were submitted to 600 respondents
comprising informal sector taxpayers in all the ten regions in Ghana. Regression
analysis was employed in our study to depict the results of the informal sector
compliance issues. The result revealed that attitudes, subjective norm and
perceived behavioral control are the main determinants of the informal sector
compliance issues. The second part of this research examined the causality
between taxes and GDP in Ghana’s economy over the period of 1980-2015. The data
were analyzed by employing the Augmented Dickey Fuller Unit Root test, the
variables were found to be integrated of the order one and the Johansen test
showed the presence of co-integration between the variables. The Granger
causality test for the study indicated a unidirectional causality from taxation
to GDP. Therefore, the study recommends that efforts should be geared towards
the improvement of tax systems in order to augment the GDP of the country.