DETERMINANTS OF RENTAL INCOME TAX COMPLIANCE AMONG RENT INCOME EARNERS IN GHANA

Charles Ayariga; Marshall Wellington Blay; Alhassan Musah; Nurjahan Akter Monira

doi:10.46281/ijafr.v15i2.2277

Charles Ayariga Senior Lecturer, Department of Accounting and Finance, Takoradi Technical University, Ghana https://orcid.org/0009-0008-4621-4676
Marshall Wellington Blay Lecturer, Department of Accounting and Finance, Takoradi Technical University, Ghana https://orcid.org/0009-0005-0852-7696
Alhassan Musah Lecturer, Department of Accounting and Finance, Takoradi Technical University, Ghana https://orcid.org/0000-0003-1107-522X
Nurjahan Akter Monira Lecturer, Department of Business Studies, State University of Bangladesh, South Purbachal, Kanchan, Dhaka-1461, Bangladesh https://orcid.org/0009-0002-4387-2602

DOI: https://doi.org/10.46281/ijafr.v15i2.2277

Keywords: Rental Income Tax, Tax Compliance, Rent Income Earners, Theory of Planned Behaviour, Ghana

Abstract

Rent tax compliance has been a major problem in many developing countries but Ghana's case is worse as successive governments have failed to enhance rent tax compliance. Rental taxation is economically significant, yet a substantial portion of landlords and developers fail to meet their tax obligations. This issue is particularly prevalent in Ghana, where rental income tax compliance remains low despite its potential to contribute significantly to national revenue. This study focuses on identifying the factors influencing compliance, specifically examining the roles of compliance costs, tax rate/structure, tax knowledge and education, and fines and penalties. Utilizing a quantitative research design, data was gathered from 260 rent income earners through questionnaires, out of a targeted sample size of 272. Descriptive statistics and a multiple regression model were employed to analyse the data and identify relationships between the studied variables and rental income tax compliance. The analysis identified a noteworthy positive association between the cost of compliance and tax rate/structure and rental income tax compliance. The results imply that tax compliance costs and the tax rate are significant determinants of rent tax compliance in Ghana. Conversely, tax knowledge and education, as well as fines and penalties, showed an insignificant negative effect on compliance. The study results imply that a proactive approach to reducing compliance costs and enhancing tax structures positively influences compliance among rental income earners. Educational efforts and penalties, however, may require alternative strategies to be effective.

JEL Classification Codes: H24, H25, H26, K42.

References

Ababio, A. G., & Gnonsio Mangueye, A. (2021). State legitimacy and tax compliance among small and medium scale enterprises: a case study of Dodowa district, Ghana. Journal of Financial Crime, 28(3), 858-869. https://doi.org/10.1108/JFC-09-2020-0195

Abdu, M., Jibir, A., & Muhammad, T. (2020). Analysis of tax compliance in Sub-Saharan Africa: Evidence from firm-level study. Econometric Research in Finance, 5(2), 119-142. https://doi.org/10.2478/erfin-2020-0007

Adu, K. O., & Amponsah, S. (2020). Correlates of tax registration compliance among self-employed in Denkyira corridor of Ghana. International Journal of Law and Management, 62(4), 365-379. https://doi.org/10.1108/IJLMA-07-2018-0137

Agbanyo, R., Musah, G., Doku, J. N., Quarshie, J., & Dery, N. Y. (2024). Perceived political corruption and tax compliance intentions among private enterprises in emerging economies: The roles of tax morale and tax tolerance in Ghana. Journal of International Development, 36(4), 2063-2095. https://doi.org/10.1002/jid.3894

Amaning, N., Anim, R. O., Kyere, A., Kwakye, G., & Abina, S. (2021). Tax compliance among Ghanaian SMEs: How impactful is taxpayer education. International Journal of Academic Research in Accounting, Finance and Management Sciences, 4(1), 40-58. https://doi.org/10.6007/IJARAFMS /v10-i4/8012

Appiah, T., Domeher, D., & Agana, J. A. (2024). Tax Knowledge, Trust in Government, and Voluntary Tax Compliance: Insights from an Emerging Economy. SAGE Open, 14(2), 21582440241234757. https://doi.org/10.1177/21582440241234757

Bani-Khalid, T., Alshira’h, A. F., & Alshirah, M. H. (2022). Determinants of tax compliance intention among Jordanian SMEs: A focus on the theory of planned behavior. Economies, 10(2), 30. https://doi.org/10.3390/economies10020030

Boateng, K., Omane-Antwi, K. B., & Ndori Queku, Y. (2022). Tax risk assessment, financial constraints and tax compliance: A bibliometric analysis. Cogent Business & Management, 9(1), 2150117. https://doi.org/10.1080/23311975.2022.2150117

Bruce-Twum, E., Schutte, D., & Asare, N. (2022). Determinants of tax compliance costs of small and medium enterprises in emerging economies: Evidence from Ghana. Social Sciences & Humanities Open, 6(1), 100343. https://doi.org/10.1016/j.ssaho.2022.100343

Carsamer, E., & Abbam, A. (2023). Religion and tax compliance among SMEs in Ghana. Journal of Financial Crime, 30(3), 759-775. https://doi.org/10.1108/JFC-01-2020-0007

Eerola, E., Kosonen, T., Kotakorpi, K., Lyytikäinen, T., & Tuimala, J. (2020, January). Tax Compliance in the Rental Housing Market. In Proceedings. Annual Conference on Taxation and Minutes of the Annual Meeting of the National Tax Association, 113, 1-34. Retrieved from https://www.jstor.org/stable/27143958

Eric, A., Solomon, A., Nicholas, A. K., Agyeiwaa, H., & Antwi, K. (2019). An Empirical Assessment of Tax Knowledge, Socio-Economic Characteristics and Their Effects on Tax Compliance Behavior in Sunyani Municipality, Ghana. Journal of Emerging Trends in Economics and Management Sciences (JETEMS), 10(4), 148-153. Retrieved from https://hdl.handle.net/10520/EJC-1cf9f2ada7

Kamasa, K., Adu, G., & Oteng-Abayie, E. F. (2019). Tax compliance in Sub-Saharan Africa: how important are non-pecuniary factors?. African Journal of Economic Review, 7(1), 154-175. Retrieved from https://www.ajol.info/index.php/ajer/article/view/182555

Mabe, J. B., & Kuusaana, E. D. (2016). Property taxation and its revenue utilisation for urban infrastructure and services in Ghana: Evidence from Sekondi-Takoradi metropolis. Property Management, 34(4), 297-315. https://doi.org/10.1108/PM-07-2015-0033

Nartey, E. (2023). Tax compliance of small and medium sized enterprises in Ghana. International Journal of Sociology and Social Policy, 43(11/12), 1063-1083. https://doi.org/10.1108/IJSSP-06-2022-0159

Nyantakyi, G., Sarpong, F. A., Asiedu, F., Adjei Bimpeh, D., Kwasi Anenyah Ntoso, J., & Ofeibea Nunoo, L. (2024). Unearthing the mediating role of political affiliation in tax compliance determinants: new evidence from Ghana. Cogent Business & Management, 11(1), 2316886. https://doi.org/10.1080/23311975.2024.2316886

Newman, W., Mwandambira, N., Charity, M., & Ongayi, W. (2018). Literature review on the impact of tax knowledge on tax compliance among small medium enterprises in a developing country. International Journal of Entrepreneurship, 22(4), 1-15.

Oduro, R., Asiedu, M. A., & Tackie, G. (2018). Determinants of tax evasion in the developing economies: A structural equation model approach of the case of Ghana. Journal of Accounting and Taxation, 10(4), 37-47. https://doi.org/10.5897/JAT2017.0275

Okpeyo, E. T., Musah, A., & Gakpetor, E. D. (2019). Determinants of tax compliance in Ghana. Journal of Applied Accounting and Taxation, 4(1), 1-14. https://doi.org/10.30871/jaat.v4i1.935

Ondoro, O. B. (2021). Factors Affecting Rental Income Taxpayer’s Compliance. African Tax and Customs Review, 4(2), 13-13. Retrieved from https://atcr.kra.go.ke

Owusu, G. M. Y., Bekoe, R. A., & Mintah, R. (2023). Predictors of tax compliance intentions among self-employed individuals: the role of trust, perceived tax complexity and antecedent-based intervention strategies. Small Enterprise Research, 30(1), 49-70. https://doi.org/10.1080/13215906.2021.1989622

Owusu, G. M. Y., Bekoe, R. A., Anokye, F. K., & Anyetei, L. (2020). What factors influence the intentions of individuals to engage in tax evasion? Evidence from Ghana. International Journal of Public Administration, 43(13), 1143-1155. https://doi.org/10.1080/01900692.2019.1665686

Owusu, G. M. Y., Bekoe, R. A., Otchere, O. A. S., & Effah, N. A. A. (2019). Determinants of tax compliance attitude. Global Encyclopedia of Public Administration, Public Policy, and Governance, 1-8. https://doi.org/10.1007/978-3-319-31816-5_3859-1

Peprah, C., Abdulai, I., & Agyemang-Duah, W. (2020). Compliance with income tax administration among micro, small and medium enterprises in Ghana. Cogent Economics & Finance, 8(1), 1782074. https://doi.org/10.1080/23322039.2020.1782074

Serem, W., Robert, K., & Phillip, M. O. (2017). The Effect of Tax System Simplicity on Tax Compliance among the Rental Income Earners in Kenya. A Case of Eldoret Central Business District. European Journal of Business and Innovation Research 5(5), 13-22 Retrieved from https://eajournals.org/ejbir/vol-5-issue-5-october-2017/effect-tax-system-simplicity-tax-compliance-among-rental-income-earners-kenya-case-eldoret-central-business-district

Thananga, A. G., Wanyoike, D. M., & Wagoki, A. J. (2013). Factors affecting compliance on rental income tax policy by landlords in Nakuru Municipality. Journal of Agriculture and Environmental Sciences, 2(1), 26-38. Retrieved from https://jaes.thebrpi.org/vol-2-no-1-june-2013-abstract-3-jaes.

Tiwari, G. (2021). Determinants of tax compliance behaviour among rental income earners in Pokhara. Journal of Nepalese Business Studies, 14(1), 69-81. https://doi.org/10.3126/jnbs.v14i1.4149