Financial Literacy, Perceived Justice in the Tax System and Tax Compliance: A Sub-Saharan African Perspective

This study explores the relationship between financial literacy, perceived justice in the tax system, and tax compliance behaviour among individuals in Ghana's informal sector. Using a self-administered questionnaire, data was collected from business owners in the Greater Accra region. The data was analysed using descriptive statistics, correlation, and multiple regression analyses in SPSS and Process MACRO for SPSS. The results indicate that higher levels of financial literacy and perceptions of justice in the tax system positively influence tax compliance. Furthermore, perceived justice moderates the relationship between financial literacy and tax compliance, with the relationship being stronger when individuals perceive the tax system as fair. These findings suggest that both financial literacy and an equitable tax system are essential in fostering voluntary tax compliance in Ghana’s informal sector. The study highlights the need for policymakers to create and sustain transparent and fair tax systems, alongside implementing financial literacy programs tailored to the needs of the informal sector. Thus, by improving the perception of tax fairness and enhancing financial literacy, there is potential for increased voluntary tax compliance, which could result in higher tax revenues and better funding for public services. This, in turn, could contribute to the overall economic growth and development of Ghana.