ABSTRACT: –

Introduction: Taxation is the foundation of the economic structure of most developing countries including Ghana. Despite this, collection of tax revenue with respect to the informal sector of Ghana has been a challenge for tax administrators as many businesses deploy strategies to avoid and evade tax. In light of this, this study assessed the mediating role of general tax knowledge on linkage between formal tax education and filing compliance among informal sector SMEs.

Methodology: The study was carried out within the guidance of quantitative method. This helped the researcher to examine the relationship among the study variables namely formal tax education, general tax knowledge and filing compliance. Further, the design employed in this study was the descriptive research design. Data was obtained from 1,152 informal sector SMEs within the Greater Accra Region of Ghana. The overall sample size for the study was 1,152 respondents recruited using multistage sampling technique namely simple random and snowballing sampling. In addition, data was obtained from respondents using 12 point-based item questionnaires designed through the guidance of literature. Data obtained from respondents were analyzed using Structural Equation Modelling (SEM) specifically Partial least squares (PLS).

Findings: The study found that formal tax education exerts significant positive effect on filing compliance of SMEs within the informal sector of Ghana. Also, formal tax education exerts significant positive effect on general tax knowledge of SMEs within the informal sector of Ghana. Furthermore, general tax knowledge exerts significant positive effect on filing compliance of SMEs within the informal sector of Ghana. Essentially, the study discovered that general tax knowledge mediates significantly the effects of formal tax education on filing compliance.

Conclusion: The study stresses that when informal sector SMEs in Ghana are highly informed about tax systems, processes and procedures, they have a higher likelihood of fulfilling tax obligations and responsibilities thereby enhancing their compliance levels. Therefore, by investing in tax education for informal sector SMEs in Ghana, significant level of improvement can be achieved on the rates of compliance among informal sector SMEs, thereby fostering a more sustainable tax culture within the informal sector of Ghana.

Key Words: Formal tax education, filing compliance, general tax knowledge, tax education, tax compliance and tax knowledge