ABSTRACT:-

Introduction: The informal sector (IS) is one of Ghana’s developmental driving sectors. Operators in the sector utilize government facilities financed from tax revenue but however fail to adhere to tax obligations. This non-adherence to tax obligations by businesses in the sector has been attributed to lack of comprehension of tax education and tax knowledge. In light of this, this study looked at the impact of Formal Tax Education on General Tax Knowledge in Ghana’s Informal SME Sector of Ghana.

Method: The Social Learning Theory (SLT) was employed as a theoretical foundation to this study. The study was underscored by quantitative research method and descriptive cross-sectional survey design. Data was obtained from registered SMEs within the informal sector within the Greater Accra Region of Ghana. A 10-item based questionnaire was employed and data obtained from 1,152 respondents. Respondents for the study were sampled using random sampling and snowballing techniques. Data was analyzed using regression through SMART-PLS software.

Findings: The study found that formal tax education among informal sector SMEs is low in Ghana. This illustrates insufficient level of comprehension or mastery of issues underpinning formal tax education. Further, the study found higher level of General Tax Knowledge among informal sector SMEs within Ghana. It also shows superior or sufficient level of comprehension or mastery of issues underpinning General Tax Knowledge by SMEs in Ghana. Moreover, the study discovered that formal tax education exerts significant positive impact on general tax knowledge.

Conclusion: The findings suggest that as much as SMEs in Ghana possess a basic comprehension of tax responsibilities, they lack formal training that could deepen their comprehension of tax regulations and compliance processes. This gap indicates that informal sector SMEs are functioning with fragmented knowledge, potentially resulting in unintentional non-compliance, missed opportunities for tax benefits, and inefficient business practices. Further, the clarity is that the significant impact of formal tax education on general tax knowledge observed in the study underlines the need for structured tax educational initiatives within the informal sector in Ghana.

Keywords: Tax education, formal tax education, tax knowledge, general tax knowledge, informal SME sector