Modeling the determinants of tax compliance behavior in Ghana: a moderated mediation model

Purpose Ghana’s tax-to-GDP ratio is typical for sub-Saharan Africa but relatively low when compared to countries of similar income levels globally. In 2018, Ghana ranked 26th out of 36 lower-middle-income countries in tax revenue collection. This low tax revenue could be attributed, in part, to taxpayer negligence in fulfilling tax obligations, which undermines government revenue and limits funds available for development projects. The current study aims to develop a moderated mediation model to explain the determinants of tax compliance behavior in the context of developing economy. Design/methodology/approach This study is based on the objectivism research philosophy and quantitative research approach. Besides, structured questionnaire has been used to garner data from cross-section of Ghanaian Small and Medium Enterprises. The analyses were performed using the Smart Partial Least Square version 3.8.9 software and the structural equation modeling (SEM) approach in testing the hypotheses of the study. Findings Our indicative results have revealed that tax knowledge, tax sanctions, tax fairness perception and tax awareness. Moreover, attitudes toward tax significantly mediates the relationship between tax compliance and its determinants. Again, social norm significantly moderates the relationship between attitudes toward tax and tax compliance behavior. Practical implications It has been highlighted in this study that social norms enhance voluntary compliance, even in the absence of strict enforcement by shaping people’s perception of what is appropriate and approved behavior. Besides, tax knowledge reminds as that a well-informed taxpayer is most likely to behave rationally and comply knowing the consequences of non-compliance. Originality/value Previous studies have highlighted issues related to tax non-compliance; however, this study explores how social norms positively influence taxpayers’ attitudes, even in the absence of strict enforcement by shaping people’s perception. This research offers theoretical, policy and practical implications for improving tax administration and the overall tax system in Ghana.