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CAHPTER ONE INTRODUCTION This chapter deals with the background of the study, statement of the problem, purpose

of the study, research questions, significance of the study, scope of the study limitations, delimitation and organization of the study. 1.0 Background of the Study All Governments, the world over require tax revenue. Governments therefore institute policies and laws to regulate and administer, the collection and the use of tax revenue at all levels of their societies. To carry out these functions satisfactory, adequately revenue has to be generated. The optimum means by which the government can raise revenue to meet its expenditure is through tax. According to Oberg G. in his book Goodwill Taxation on Ghana LAWS (2000-2007) defined Tax as a persons share, contribution and obligation for the maintenance of the socio-economic order, and good governance, and to enjoy the sovereign rights privileges and powers of a state N.B. Menlo in his books Theory and Practice of Taxation also defined taxation as a process whereby a state or government obtains contribution from its citizens or residents of each territory for the maintenance of state machinery. Taxation is the imposition of tax on the incomes of citizens or property for the support of government for a specified period of time usually annually or any other period of time defined. Paying of tax is a civic responsibility and therefore is a compulsory payment required by the law. Taxation can be used to check inflation, redistribute income or correct imbalances in the payment of a country. The three largest sources of tax revenue of the Government of Ghana are Income Tax, Company Tax and Valued Added Tax (VAT). The informal sector is notoriously the most difficult sector to subject to an account based tax, such as the income tax or VAT. This is the case for both developed and developing countries, although the problem is likely to be more acute in developing countries 1

because of the greater percentage of businesses that is likely to be categorized as small and fewer resources available to the tax administration to enforce the tax. Ghana as a developing country has the largest segment of its economically active population in the informal sector. It is estimated that the informal sector which includes self-employed persons like market women, tailor, seamstress, farmers and shop owners engages in about 80% of the working population, for a myriad of reasons contribute only about 5% of tax revenue to the nation. However, the need for special rules arises only for those taxpayers that are unable to keep proper accounts providing for the computation of the taxpayers taxable income. These taxpayers can be divided into two classes. The first class is those taxpayers that are unable to keep the basic accounts needed to compute income and deductions. The second class is those taxpayers that are able to keep a basic set of accounts but not the extensive records fully necessary to compute taxable income. The IRS therefore introduced an innovative method of tax collection from the informal sector called Standard Assessment. Standard Assessment tax system prescribes a fixed lump sum amount that a taxpayer must pay as their income tax liability for the period (year). The identification of taxpayers subject to standard assessments may be by reference to particularly businesses or by reference to turnover. Technically, the standard assessment was a minimum tax liability, but the system was administered as if it were a final liability.

1.1 Statement of Problem

Unfortunately, the standard Assessment has not solved the problems associated with collecting the tax from informal sector. This is attributed to the following reasons: Illiteracy or inability to keep proper records. Only members of identified trade associations are easily reached. Many tax payers consider the Standard Assessment as their final tax liability. The probability of the conflict of interest between collectors and taxpayers since collectors are often members of these trade associations. Inadequate personal or staff and lack of logistics. 2

1.2 Purpose of the study This study will therefore attempt to; Find out why proper records of accounts are not kept. Assess the process of the present methods of the tax liability of the informal sector. Find out how tax assessment problem has affected the tax revenue. Identify any shortcomings associated with the present method.

1.3 Research Questions The researcher intent to find solutions to the following; What has contributed to the problems of tax assessment? Why informal sector do not keep proper books of account? What measures should be taken to reduce these problems? Why the taxpayers do not have the adequate education on the payment of taxes.

1.4 significance of the study The study will help informal sector understand the system better. It will benefit the tax authorities in their search for more efficient ways of assessing the informal sector. This study will also help management of informal sector to know the importance of keeping proper records of accounts for tax purposes. Finally, it will encourage students of taxation to carry out further studies in this area of taxation. 1.5 Scope of the Study The study was concentrated on population sample drawn from the informal sector and staff of Internal Revenue Service (IRS) in Kumasi. From these sources, it is believed an idea of problem associated with assessing informal sector for tax purposes would be obtained to reflect the general situation of the population. 1.6 Limitations As a characteristic to any research work, the researcher is also confronted with certain problems that hinder the smooth research work. 3

One limitation was that some of the business owners were not willing to reveal information about their business operations. They had the notion that additional tax would be levied if they disclose the necessary information about their business operations. They had the notion that additional tax would be levied if they disclose the necessary information about their business and as a result of this; the researcher did not get the excepted information from them. Also, some respondents deliberately refused to provide the correct information which made the analysis of the work difficult and time consuming from the personnel manager and the officers of IRS. 1.7 Delimitation The study is limited to the operation of some selected informal sector in Kumasi Central Market. This location was chosen because of the availability of data and to limit the constraint that will be encountered, should the study be spread over a wide area. 1.8 Organisational of the Study Below is the process in which the work is organized. Chapter one deals with the introduction aspects of the study, statement of the problem, purpose of the study, research questions, and significance of the study, limitations and delimitations of the study. Chapter two relates to the previous work done by other researchers. This chapter review other literature and theoretical framework written by people that related to tax assessment. Chapter three is the methodology, which describes the methods used in the collection of data for the study. Some of the methods included the administration of questionnaires and personal interviews of the population sample. In few instances personal observation was also used. Chapter four comprises of the analysis of the data and findings and The last chapter is based on summary, conclusions and recommendations.

CHAPTER TWO LITERATURE REVIEW 2.0 INTRODUCTION No country on this earth can ever develop without an adequate tax base to fund it projects. To successfully accomplish this study there was the need to review relevant literature that relates to this study. 2.1 THE MEANING AND IMPORTANCE OF TAXATION Taxation has been defined in various ways by educationist, tax practitioners and economists. Below are some of the definitions: Taxation refers to means or mechanism of raising revenue for government from the income of a person through legislation (Amanfo, 1995). Taxation is the deliberate attempt on the part of the government to impose a levy or fine on the citizenry to keep the economy going (Appiah-Sokye, 1996). Taxation can be defined as the compulsory payment by individuals and companies to state by (Randolph Nsor-Ambala) A tax is a compulsory levy imposed by authority of the law-making body of a country or by decree that is enforceable by law. In Ghana a tax is a compulsory levy on a person, imposed by an enactment of the parliament of Ghana. Basically there are two types of taxes, namely; Direct and Indirect Taxes. Government obtains revenue from direct and indirect taxes. The direct tax is levied on incomes and property of individuals and organizations. Examples are Pay-As-You-Earn (PAYE), SelfEmployed taxes, Corporate or Company Taxes, Capital Gains Tax and Gift Tax. Indirect taxes on the other hand are levied on goods and services purchased for sale or for consumption. Examples are Export Duty, Import Duty, Excise Duty and Value Added Tax. One proves used to distinguish a direct tax from an indirect tax is the incidence of the tax. Under direct taxes the incidence of taxation rest on the payer whilst in the case of indirect taxes the incidence of the rests on the ultimate consumer. Tax revenue is used to raise revenue and help government to provide certain services such as payment of public servants, regulate general economic activities, redistribute incomes, regulate the consumption patterns of certain goods and services, encourage or 5

discourage the consumption of certain goods and services, protect infant industries, stimulates economic growth, for balance of payment correction, help achieve a balance in both private and the public sectors by transfer of incomes, retaliatory measure , control inflation, and redirect resources towards governments priority areas. 2.2. STRUCTURE AND TAX SYSTEM The structure and tax system of taxation refers to the means through which taxpayers are made to pay proportion of their income as tax. That is the rate of taxpayers income paid as tax. Basically, tax structure may be classified based on the percentage or proportion of income paid as tax. In this sense there are three systems of tax. They are; Proportional tax system Progressive tax system Regressive tax system

2.2.1 Proportional Tax System It is the one which is neither progressive nor regressive. It is fixed at the same rate irrespective of income. The rate of tax is the same for all income groups (high and low).Although the rate of tax is the same, the amount of tax paid by high income earners is higher than those paid by lower income earners(e.g. Corporate Tax). 2.2.2 Progressive Tax System This system is base on the fact that the higher one earns, the higher one pays into the tax fund and lower one earns, lower one pays into the tax fund. In this way it ensures equity or fairness since the rich pays more than poor. The progressive tax is one which is levied according to persons ability to pay. 2.2.3 Regressive Tax System This is a tax system in which the proportion of consumer income paid as tax decreases as income level increases. This implies that, the higher income earners are made to pay relatively less of their income as tax. 2.3 ATTRIBUTES OF A GOOD TAX SYSTEM

Adam Smith, a classical economist, captioned the attributes as canon of taxation and maintains that there are four qualities of a good tax system which are still useful today. These are Equity, Convenience, Certainty and Economy of collection. 2.3.1 Equity According to him equity means that there should be fairness in the amount of tax paid. The good tax should be fair to the people who are required to pay it. Therefore amount of tax paid should be proportionate to the income available to the taxpayer. 2.3.2 Certainty People should be able to determine their true tax liability with fair degree of accuracy. In this direction, tax laws must be available to the citizens so that they know their right and obligation as regards taxation. Taxpayers should therefore be clear in their minds as to how much tax is to be paid at any point in time. The tax administration must be able to defend his/her position. 2.3.3 Convenience Tax should be convenient for the government to administer and for the people to pay. The location of tax office must be at the convenience of the taxpayer. In the same vein the forms to be completed must be simple for the taxpayer. Similarly the necessary facilities must be put in place to assist the tax administrator in the discharged of his/her duties. 2.3.4 Economy The economy quality has to do with the cost of collecting the taxes. The administrative cost of collecting and enforcing the tax should be reasonable in comparison with the total revenue generated by tax. 2.4 BRIEF HISTORY OF TAXATION IN GHANA Early form of taxation in the gold coast was indirect tax-in the form of customs duty in 1850.It was levied on imported goods at the rate of % ad valorum.The British introduced tax after they had taken over the Danish forts and trading posts to meet the cost of administrating the colonies. Governor Major S.J Hill, after his arrival into the gold

coast met with the chiefs in april, 1852 in connection with the introduction of poll tax(a tax of a fixed amount collected from every citizen of a country) Among the reason for the acceptance of the poll tax by chiefs were the suggestions and proposal that the proceeds from the tax collected would be used in providing health facilities, education and other amenities for the people and more importantly, the chiefs would be paid stipends of allowances if they assisted in collecting the taxes. The rate was 1 shilling per head for every man, women, and child living in the British protected areas. Actual collection from august, 1852 to July, 1853 was 460,656 but it was considered to be a promised start. The promises made to the chiefs were not fulfilled and by 1862 collection had ceased. Attempt was made to reintroduce the poll tax in 1877. Governor Sir William Maxwell made proposal made proposal for the introduction of general direct taxation but he died before his proposal could be implemented. The most serious attempt to introduce income tax into the gold coast was by Governor Sir Ransford Slater in September, 1931. This became necessary because the government had a budget deficit of 400,000 and there was the worst economic depression at that time all over world. To redeem the deficit an introduction of the tax at the rate of (6d) six pence in the pounds on all incomes of 40 and above was proposed. There was unequivocal opposition to the governors proposal. Sir Ransford Slater assessing the situation decided to withdraw his income tax proposals. Instead of the income tax, a tax on cocoa export was imposed. In 1943 however, due to the effect of the 2nd world war, the price of cocoa fell to 30 per ton and the government needed 800,000 to balance the budget. Since there was no other source to consider, the option available to the government were; A drastic cut in government expenditure on social services or The imposition of income tax

Governor Sir Allan Burns opted for the income tax. Even though there were few protest meetings and protest speeches from the official members of the legislative council, it was clear that public opinion had undergone a

change and the income tax bill went through the various stages in the council without much difficulty and became law on 22nd September, 1943. Income Tax Administration in Ghana started in September, 1943 with the passing into law of the Income Tax Bill on 22nd September, 1943 as the Income Tax Ordinance No.27 of 1943. Initially, the Department collected tax from only a few limited liability companies and a very small number of individuals. Over the years other taxes and duties were added to the Income Tax. These were:1. Mineral Duty (1952) 2. Betting Tax (1955) 3. Casino Revenue Tax (1959) Between 1961 and 1963, additional taxes and duties were introduced. Among these are Property Tax (1961), Entertainment Duty Tax (1962), Airport Tax, Hotel Customers Tax, Standard Assessment and Excess Profits Tax, all in 1963. Pay As You Earn (PAYE) was introduced with effect from lst July, 1961 and the tax year was changed from April March to July June. The tax year was again changed to January December with effect from lst January 1983. In July 1963, the Income Tax Department was renamed Central Revenue Department to reflect the broad scope of taxes to be collected. All these years 1943 1985 the Department was a civil service department. However, in July 1986, the Provisional National Defence Council (PNDC) government took a decision on structural changes in the organization and legislation The Internal Revenue Service (IRS) law 1986 (PNDCL.143) was passed. This law transformed the hitherto Central Revenue Department into a public service organization. Prior to the promulgation of PNDCL.143) in 1986 the government in 1985 established the National Revenue Secretariat (NRS) with a ministerial status to supervise the Revenue Agencies. This role was performed with virtual autonomy from the Ministry of Finance. In 1991, the National Revenue Secretariat was relocated under the Ministry of Finance and Economic Planning (MFEP). With the coming into force of the Constitution of the Fourth Republic, the NRS lost its ministerial status and was placed strategically between the Sector Ministry and the Revenue Institutions.

Further restructuring led to the promulgation of the Revenue Agencies (Governing) Board Act, 1998 (Act.558) to establish a Central governing body in place of the existing governing boards of IRS, CEPS and VATS. However, the Revenue Agencies Governing Board was constituted in the year 2001 to ensure supervision and co-ordination of the activities of the three Revenue Agencies. This major restructuring again necessitated the change of name to Internal Revenue Service. As things stand now the Internal Revenue Service has 54 District Offices, 12 Regional offices,
36 Sub-Offices and 26 Collection Points spread throughout the country. This is to ensure quick and effective service delivery with minimal inconvenience to the taxpayer.

2.5 FUNCTIONS OF INTERNAL REVENUE SERVICE 1. Identify the taxpayer. 2. Assess the tax payer to tax. 3. Collect the tax and penalties assessed. 4. Pay all amounts collected into the consolidated fund. 2.6 MODE OF COLLECTION Payment of taxes takes many forms. Tax is received in any of the following forms; Cash Postal or money order Cheques or draft payable at the local branch of a Bank of Ghana. Cheques or draft payable in overseas countries Direct payment to the credit of the Ghana accounts(I.R.S) at a local bank as evidenced by receipt, pay-in-slip and copies of payment vouchers certified by other government departments as evidence of tax recovery at the specified request of his services 2.7 THE INFORMAL SECTOR

2.7.1 The Informal Sector in Ghana


The informal sector in Ghana include aged, young and women workers who are essentially low-skilled and are involved mainly in the services sector, and only to a lesser degree in the construction and manufacturing sectors. The informal sector in Ghana, as elsewhere in Africa (ILO, 1997), is remarkable for its heterogeneity and variety. Studies on the urban informal sector in Ghana reveal a wide range of operations in the urban informal sector that can be grouped under (i) services; (ii) construction; and (iii) manufacturing. (i) Services: Urban food traders and processors include food sellers in the market, itinerant wholesalers and retailers, bakers, caterers and cooked-food sellers. These workers are mostly women, predominantly illiterate or semi-illiterate. They acquire their knowledge and skills largely from family. They are also low-income earners and have no social security protection; health and sanitation workers chemical sellers, drugstore operators, funeral undertakers, night soil carriers, refuse collectors, traditional/herbal healers, attendants in private maternity homes, and traditional birth attendants; Domestic workers, who are also predominantly women; repairers of watches, refrigeration equipment, radios, mechanical or electrical/electronic equipment, mostly young male workers under 45 and have either received some basic education or are drop-outs, but among whom are to be found skilled workers whose skills are largely acquired through years of apprenticeship; garages auto mechanics, sprayers, welders, vulcanizers, auto electricians, many of whom received some basic formal education alongside many drop-outs, and acquired their skills through years of apprenticeship; Graphic designers, mostly males between 25 and 50, about two to six workers in each unit who acquired their skills through limited vocational training and apprenticeship; audio-visual workers photographers, cinema/video operators, performers, musicians, film-makers are skilled workers who have received basic formal education but limited formal vocational training and apprenticeship who are mostly male but among whom the number of females is increasing;


hairdressers and barbers/private security men who are aged workers with very low educational standards, ill-equipped, lack job security and opportunities for career advancement, and without any social security protection. (ii) Construction Construction workers masons, carpenters, steel benders, small-scale plumbers, housewiring electricians, and carpenters, who are mostly male, aged between 20 and 40 and are mostly school drop-outs. Electricians often have some basic training, while all the other groups go through years of apprenticeship. (iii) Manufacturing In this sub-sector of the informal sector, the predominant activities cover food processing, textile and garments, wood processing and metal works. Women dominate food processing while men constitute a clear majority in metal works and wood processing. Apprenticeship is the most common form of skill acquisition and employment in urban informal manufacturing units. In general, it can be said that labour standards in the informal sector are not in conformity with those that apply in the formal sector. Informal sector workers lack social security, economic support and legal protection. There are common needs that are differentiated among various groups of informal sector workers, rural and urban. They include: (i) social needs job security, health care facilities and the promotion of occupational health and safety, protective clothing, protection against income losses during sickness, annual leave and maternity rights, minimum wage, general infrastructure and environmental sanitation; and (ii) Economic needs training and education for skills development, basic tools, business premises, financial credit, marketing opportunities. While labour legislation and practice widely provide for the interests of all workers, they nonetheless reveal some limitations with regard to informal sector workers. Labour legislation does not adequately cater for casual labour with respect to written contracts, workers compensation, labour inspection, annual and maternity leave. With regard to regulatory institutions, the ineffective functioning, where they existed at all, of Public Employment Centres, Labour Inspectorate and Minimum Wage-Fixing and Monitoring Machinery have been noted. Similarly, the marked disuse of the wide discretionary 12

powers of the public authorities for labour protection has been cited (Adu-Amankwah, 1997). Under the Internal Revenue Act, 2000 (Act 592), most incomes from the informal sector are taxable except in cases where such incomes are determined to be the income below the minimum marginal taxable income or determined to be the income from cocoa of a cocoa farmer. However, the law grants a lot of concessions to farmers in tree crops, livestock and food processing which are not necessarily exempt. In spite of the provisions of the law and the relatively large self-employed and informal sector, compliance record remains very low. A good number of them fail to register and file returns with the Internal Revenue Service. 2.8 PROBLEMS OF TAXATION IN THE INFORMAL SECTOR Despite an emerging consensus on the need to tax the informal sector, little is known about it. The informal sector in Ghana takes a larger population but yet they contribute less of the total direct tax.Taxation has been a major source of public revenue to the government to meet it expenditure both recurrent and development projects. Reasons for a large informal sector in Ghana are non-deterrent penalties, high rate of returns on illegal and underground operations, confidence in the monetary system, high levels of illiteracy and skills requirement, poverty, labour intensive and adapted technology, pursuit by the system, limited capacity of the formal sector to employ and ease of entry. These have resulted in problems of taxation of the sector. (Reference to IDS Bulletin, Volume 33, Number 3, 1 July 2002, pp. 90-97(8)) Traditional understandings of the problem point to administrative and political constraints. First, the tax bureaucracies of many developing country governments do not have the capacity to implement, monitor and enforce taxation. Second, as the informal sector forms a substantial vote bank for politicians, taxing this sector remains politically sensitive. A case study from Ghana nevertheless suggests that there are real possibilities to tax the informal sector. Since 1987, the Ghanaian government has delegated the responsibility 13

for collecting income tax from informal passenger transportation operators to their unions, primarily the Ghana Private Road Transport Union (GPRTU). Interestingly, the GPRTUs role in income tax collection originated in the politics of its corporatist relationship with the Jerry Rawlings regime (19812000). In the house journal of the internal revenue service No.18 (page 25) a forum organized for auditors and tax consultants to educate them on income tax administration in February 2007 at Koforidua Mr. Samuel Tetteh (District Manager) said accounts prepared by SelfEmployed Persons invariably contained true expenses but understated incomes. and expenses were recorded. Mr. Tetteh informed participants that unsigned or uncertified accounts were against the Tax Law under section 72(3) to (6). He decried instances where some accounts with high profit margin found their way to the Internal Revenue Service Office only to be told by the Taxpayers that those account were meant for the Bank for the purpose of obtaining loans. He said it had now got to the point where account meant for the Banks would have to be certified by the service as the true copy that has been presented for tax purposes. Mrs. Janet Opoku-Akyeampong (2003-former commissioner) enumerated these factors among others adversely affecting revenue mobilization from the informal sector: a) Low level of compliance among the taxpaying public in the informal sector. b) Inadequate tax education to create awareness within the taxpaying public of the informal sector c) Lack of funds to provide transport facilities and other logistics to enhance collection. On the other contrary, with the right environment, that is logistics and motivation the set goals and objectives of the informal sector taxation can be achieved. In the house journal of the internal revenue service No.16 (page 20) at their end of year party 2006, Speaking on behalf of the Regional Director, Mr. Nyantakyi, District Manager for Takoradi District emphasized on the performance of the region in 2006, 14 He explained that not all sales giveaways were recorded in their books through all purchases

which he said was full of challenges and expectations, especially during the last quarter. He said the Region managed to collect 30,914bn more than its collection of 174.823bn in 2005 representing an 18% growth. He continued by stating that the self-employed sector which is the Regions weakest area recorded 1.8% less than that of 2005. This, he said, it is a big challenge to all District Managers in the region, since the self-employed form the largest number of taxpayers in the region. When it came to challenges that confronted the region in 2006 .He laid emphasis on the following: Lack of voluntary compliance especially in the informal sector Improper record keeping by some tax payers and Lack of logistics such as computers and operational vehicles,

In another report on the role of tax administration (IRS) in enhancing compliance, in his conclusion mention that serious monitoring should be a tool of the IRS to ensure voluntary compliance. Education by dissemination information to tax payers e.g. organizing forum, workshop, seminars, lectures and publishing materials on taxation and many more. Little drops of water, they say make a mighty ocean but with westerners, little drops of their taxes made their mighty nation as we witness today. I believe our nation could be of a kind if Tax administrators push every income earner into the tax net to comply with tax regulation by increasing the number of registered taxpayers with fearless zeal to make it a mighty Nation. 2.9 PROBLEM FACING TAX OFFICIALS IN TAX COLLECTION The internal revenue service faces a lot of constrains which make them dont achieve their own target set. For instance in the commissioners speech at the 2008 management seminar held at Miklin Hotel in Kumasi on Thursday, February 28 2008 reveals that performance of the service in respect of revenue collection for the year 2007 was a very difficult one. The Service collected total revenue GH 910,235,784.12 as against a Ministry of Finance and Economic Planning target of GH 907,054,409.59 this was a mere 2% above the Ministrys target. But they failed however to collect managements target of GHc930 million upon which the organizations 2007 Budget was based. This arrangement obviously made it difficult for the Service to meet some of its financial


commitments for the year because this was an obvious shortfall in their revenue expectations. A Break Down Of The Figures Is As Follows PAYE Corporate tax Self- employed Miscellaneous tax National Reconstruction Levy APSC GH 372.2 GH 418.7 GH 45.6 GH 64.8 GH 3.2 GH 5.7 GH910.2 The target set for the Unit was to enable the Service meet their obligations to staff and improve workplace accommodation and logistics. The Commissioner, Maj Ablorh- Quarcoo (Rtd) in an address, noted that even though he promised to allocate a vehicle to Tax Audit last year, it could not materialize for lack of adequate resources. He stressed that the totality of resources available to the services can not satisfy all its needs. He mentioned the renovation of facilities at the Head office and the purchase of vehicles for use as some of the project that are currently being undertaken. Maj. Ablorh-Quarcoo (Rtd) advised staff to be professional in their dealings with taxpayers because they serve as ambassadors of the service in the eyes of the companies they audit. Their attitude must reflect positively on the image of the service. He admonished the staff not to allow any extraneous variables to divert their focus and urged them to remain professional and knowledgeable in other to wine the confidence and respect of taxpayers. The Deputy Commissioner, Research, planning and monitoring, Mr. Kwadwo Owusu, congratulated the staff and commended them for their sprit of unity and team effort and urged them to show integrity in their dealings with taxpayers. In the Daily Graphic of Saturday, March 1, 1996 number 1438 page 7; the Metropolitan Chief Executive Mr. Gyamdie said that, staff-related problems such as lack of public


education, outmoded property valuation list, erratic billing system and managerial problems were some of the militating factors against revenue generation. Mr. Gyamdie also said that the inability of the metropolis to achieve its revenue targets could be traced to weak revenue collection machinery, lack of supervision and coordination of the activities of the revenue collectors and lukewarm attitude of some collectors. Currently, some under listed problems confront the collection of taxes in Ghana: a) b) c) d) e) f) g) Difficulty in assessing incomes due to subsistence. Underestimation of the Income of the self-employed. Tax evasion. Bribery and Corruption. Ignorance of Importance of taxes. Inadequate to supply of certain amenities in some areas. Non submission of returns.

2.10 CONCLUSION It could be concluded that problems of taxation in the Kumasi metropolis using Adum District of the internal revenue service as a case study ranges from a wide varieties of areas. It begins from administration through personnel, logistics, human relation, moral, education and commitment on the part of tax collectors and taxpayers. It is on this note that researchers on this topic try to identify certain pertinent problems that hinder smooth tax collection in the Kumasi metropolis. It is expected that the service would be able to find lasting solutions to such problems so that the nations required tax could be adequately realized.


CHAPTER THREE METHODOLOGY 3.0 Introduction The methodology of this research will comprise the population, the sampling design or technique, research design, instrument for data collection, procedure of data collection and data analysis. 3.1 Research Design The research design mainly depends on the research purpose .The Research can be said to be descriptive and explanatory. It is descriptive where the study seeks to describes phenomena as they exist. It is use to identify and obtain information on the characteristics of a particular problem. While explanatory study even often extends the descriptive approach to suggest or explain why or how something is happening. Explanatory research aim at understanding the situations by discovering and measuring casual relationships that exist between two variables. This study is both descriptive and explanatory. It is descriptive since it examined the attitude of the society toward tax collection system, i.e. The workers, tax collectors and the tax officials to find out how the problems of tax collection system at the Kumasi metropolis could be resolved. It is also explanatory in that it sought to examine the impact of tax payer perception on tax payer regularity of payment. The research takes inductive approach as it moves from particular situations to make broad general ideas as common element can be identify and the results analysed and presented in general terms other than deductive approach which belief that human behaviour and situations are dynamic and keeps changing in such a way that there is the 18

need to describe situations rather than generalise them. This study is basically to identify and examine the factors which have contributed to the ineffectiveness of tax collection process in the informal sector using Adum District of Internal Revenue Service as a case study.

This study is basically a case study since it focused on raising tax revenue at Kumasi Metropolis. It usually involves both qualitative and quantitative techniques in gathering and analysing information. The qualitative deals with understanding behavior from the participants own subjective frame of reference which describes conditions that existed at a particular point in time. For instance this technique would be use to examine the perception towards tax collection system at the Kumasi Metropolis. The quantitative nature of this study will analyze numerical data with statistical techniques. These perspectives would be necessary so that the facts could collaborate with one another for convenience of the singular objective of the write-up. 3.2 Population The population for the research was chosen in relation to the subject matter. To get correct and accurate information, the research would be conducted among two groups of people which consist of the tax officials and the tax payers i.e. the small scale selfemployed of the informal sector. The population size for tax officials and tax payers of the informal sector were eight (8) and fifty (50) respectively. This study will focus on interaction with the tax officials and various groups of the small- scale self-employed. 3.3 The sampling design or technique To make the sample size representative of the population above, stratified sampling technique will be used to solicit the views of cross-section of the population of Kumasi Metropolis to hear their views about factors which has contributed to the ineffectiveness of tax collection process in the informal sector The reason for using the stratified sampling is that, it gives an opportunity for every group or each stratum to obtain the required sample size to be included in the sample which ensures a fair representative of the population in Kumasi Metropolis through simple random sampling method..


Based on this, fifty -eight (58) people from the two categories will randomly be selected. The first group that is the tax officials includes four (4) tax collectors and four other tax officials. The final level that is the tax payers which constitute chop bar operators, artisans, dressmakers, transport owners and petty traders. 3.4 Data Collection Methods Primary and secondary sources of data would be used in gathering data for the research. Questionnaires and interviews would be the main primary sources of data for this research. Secondary sources of data will be obtained from newsletters, unpublished research work, brochures, textbooks, and other relevant source.

3.5 Instrument for data collection The instrument for data collection would basically be questionnaire and interviews as mentioned above. The questionnaire will take a form of structured questionnaire which contained both open and closed-ended questions. The interview would take a form of face-to-face interactions using the approach of semistructured interview involving both Tax Officials and Tax Payers. 3.6 Procedure of data collection The research questionnaire would be distributed to the selected sample size of the population and they will answer on individual basis depending on how the questionnaire and interview would be structured and administered. 3.7 Data Analysis The quantitative data analysis technique will be employed in the data analysis. Data collected would be edited, coded and analyzed into tables, graphs and in a documentation form.




The main topic for the study was problems facing Internal Revenue Service in tax Assessment of Informal sector. In analyzing the data gathered, it was important to focus on how best the objectives of the study could be clearly brought to the fore. The researcher therefore employed the use of some statistical tools such as frequencies, percentages, tables, pie charts and bar graphs etc and these had the advantage of making the analysis more simple and understandable. 4.1 Response rate Out of the nine (9) tax officials that were contacted or sampled, only seven (7) officials were contacted through structured questionnaire which contained both open and closedended questions. The tax officials in fact granted the researcher good reception, providing adequate information useful for the study. The response rate was 77.77% on part of the tax officials. With regard to taxpayers in the informal sector fifty (50) people were selected using stratified sampling technique to solicit the views of cross-section of the population in Kumasi Metropolis. Forty (40) responses were received out of fifty (50) questionnaires issued out, representing 80% of the population sampled. The response to questions by the population (Tax officials and Taxpayers) provided the researcher valuable information with regards to the ineffectiveness of the tax collection process, the relationship between taxpayer perceptions and measures to ensure tax compliance in the informal sector were considered for discussion in relation to the research questions.



Respondents Background information


Source: Researchers Field Survey, 2010 The chart above shows that 17 Taxpayers have been operating the business between 1115 years, between 6- 10 years were twenty five (25), and a year to five years was six(6) and two(2) taxpayers below one year. The Tax Officials on the other hand, five (6) respondents had worked between 6 (six) to 11 (eleven) years, and between one to five years was one (1). From Figure 1, since most of the respondents had more than five years of experience regarding tax payment and tax collection, it reflects the usefulness of their responses for reliable analysis and valid conclusions for this study. 22

4.3. Occupation/business of taxpayers

Frequency Trading 8 Farming 6 Food processing 7 Beauticians 5 Audio-visual workers 4 Construction workers 5 Transport 5 TOTALS 40 Source: Researchers Field Survey, 2010


% 20 15 17.5 12.5 10 12.5 12.5 100

The table above represents the occupation of the Taxpayer which suggests the principal activity they do in their life to earn money. It could be deduced that the field survey gives an opportunity for every group or each stratum to obtain the required sample size to be included in the sample which ensures a fair representative of the population.

4.3.4 Level of education 23

Responses No formal education Primary school Junior high school Senior high school Tertiary TOTALS

Frequency 3 5 23 7 2 40

% 7.5 12.5 57.5 17.5 5.0 100

Source: Researchers Field Survey, 2010 The table above represents the level of education of the Taxpayers. From the above table, three (3) respondents representing 7.5% have no formal education. Five (5) respondents representing 12.5% said they have primary education, twenty three (23) respondents representing 57.5% said they have junior high school education, seven (7) respondents representing 17.5% said they have senior high school education and 2 respondents representing 5% said they had tertiary education. It suggests that collectively 77.5% of the respondents education fall below senior high school which indicates that majority of the people within the informal sectors have basic formal education whose skills are largely acquired through years of apprenticeship. 4.4 The Ineffectiveness of Tax Collection Process In other to know some factors which have contributed to the ineffectiveness of tax collection process especially in the informal sector seven (7) variables were chosen. Both respondents expressed their views on adequacy of tax education, record keeping of Accounts, place of payment. Tax Officials responded to availability of staff and logistics, field inspection, collection and monitoring and punishment for tax defaulters, and problems with tax officials were for Taxpayers. 4.4.1 Adequacy Tax Education Responses Tax Officials Frequency Not at all adequate Somehow adequate Adequate Quite adequate Total 4 2 0 1 7 24 % 57.14 28.57 0 14.29 100 Taxpayers Frequency 24 0 6 10 40 % 60 0 15 25 100

Source: Researchers Field Survey, 2010 The table shows responses from both Tax Officials and Taxpayers. In analyzing the data 57.14% and 60% respectively were not satisfied with the tax education, the remaining were somehow or quite satisfied with the tax education. The tax officials reasons for the inadequacy were resources such as materials to be used, the appropriate media to be used and resource personnel. The Taxpayers on the other hand said because they hardly see or hear any tax education on television, radio or posters. The Table suggests that collectively 59.58% of the respondents are of the view that tax education is not adequate. Therefore we can conclude that one of the significant causes of the ineffective tax collection process at the Adum District of Internal Revenue Service is low or inadequate tax education.

4.4.2 Availability of Logistics

Logistics for Tax collection

12.29% 87.71% Yes No

Source: Researchers Field Survey, 2010 From the above diagram it shows that, 87.71% of the Tax officials responded negatively to the adequacy of logistic for tax collection and 12.29% said logistics were adequate for tax collection.The responses indicate that majority of the officials responded negatively to the adequacy logistics. It could be therefore objectively concluded that inadequate


logistics (stationary, telephone, inadequate vehicle for field inspection) is another significant contributory factor for the ineffective tax collection at the Adum District. 4.4.3 Adequate staff for field inspection, collection and monitoring. Responses Quite adequate Somehow adequate Adequate Not at all adequate Total Source: Researchers Field Survey, 2010 The table above indicates that six (85.71%) of the respondents expressed that effectiveness of supervision, collection and monitoring is not at all adequate to expectation due to inadequate logistics and equipments and the remaining (14.29%) expressed that it was Somehow adequate to expectation. This suggests that lack of adequate staff for field inspection; collection and monitoring are contributory factor to the ineffective tax collection process at Adum District of Internal Revenue Service. 4.4.4 Record keeping of Account Percentage 25% 75% 100% Frequency 0 1 0 6 7 % 0 14.29 0 85.71 100

Respondents Frequency Keep Records 10 Do not keep Records 30 TOTAL 40 Source: Researchers Field Survey, 2010

The study revealed that 25% of the respondents do keep records of their activities and this facilitates the tax assessment. Thus, those who keep records make their records available to tax inspectors who draw their own conclusion. However, 75% percent of the informal sectors do not keep proper records of Accounts. Their explanation for this state of affairs was that, the volumes of the transactions are so small and that easily commit what is necessary to memory. Some of the respondents are of the opinion that record keeping is not necesaay since most of them are sole proprietorship. 26

4.4.5 Place of Payment After taxpayer had been assessed and fairly and conveniently, there is the need for the taxpayer to settle his or her tax liability, the question that came into mind is where the taxpayer will settle this tax liability. During the study, it came to light there are three places of payment of tax liability. This illustrate on the table below; PLACE IRS office Kumasi Metropolitan Assembly (KMA) IRS personnel who go FREQUENCY 20 10 10 PERCENTAGE 50% 25% 25% 100%

round collecting taxes TOTAL 40 Source: Researchers Field Survey, 2010

The study revealed that 50% of the small businesses in the metropolis pay their taxes directly at the cash office of the IRS. 25% pay their taxes at the KMA office and the rest pay their taxes directly to the personnel of the IRS who go round to collect the taxes. The respondents said if the tax officials had the necessary transportation to always go round, they would have prefer paying directly to them. 4.4.6 Punishment for Tax Defaulter Responses Not Punished Somehow punished Very often punished Total Frequency 0 5 2 7 % 0 71.42 28.58 100

Source: Researchers Field Survey, 2010 Table above indicates how often tax defaulters are punished. five representing 71.42% responded that they are somehow punished, which means the punishment given is not 27

enough to scare defaulters and two representing 28.58% said they are often punished. The opinion of the 71.42% of the Tax officials, it is appears that the punishment for tax defaulters is not effective to deter offenders from non-compliance, and it might be concluded that it is one of the possible contributors to the ineffective tax collection. This is because since tax defaulters are not effectively punished, they are not compelled to honor their tax responsibilities. This tends to weaken the tax system; tax is a compulsory payment for which mechanisms of compulsion through punishment must be effectively put in place to ensure its compliance, otherwise the collection process suffers. 4.4.7 Opinions of Taxpayers on Problems with Tax Officials Opinion of tax payers on general problem they normally encounter with tax officials during their field inspection or payment of Tax at IRS. The following issues were brought to light: Impatience of tax officials. Closure of shops after payment when official receipts cannot be found. Low knowledge level of tax payers because of that they find it little difficult to understand regularity of the tax system when explained by the tax officials. Irregularity of Officials for tax collection. 4.5 Taxpayer perceptions of the Tax System Questions were asked to know the perceptions of taxpayers about the tax system. The tax payer perception of the tax system in this study includes four of which have to do with their perception of it being fair, convenient, certainty and with its importance. 4.5.1 Convenience of Tax office to tax payers


Convenience of Tax office

very convenient 10% convenient 38% not convenient 52% not convenient convenient very convenient

Source: Researchers Field Survey, 2010 The table above shown that, 52% of taxpayers said the tax system is not convenient meaning the location is very far from their places of operation, the same vein the forms they have been filling are not simple because of high illiteracy rate among taxpayers. Therefore they find it difficult to understand the requirements on the forms. 38% also said it convenience and the remaining 10% confirmed the system to be very convenient because their places of operation are closer to the tax office which also gives them easy assess to any information. It could be deduced that with 52% thinking that the system is not convenient while the remaining goes for convenience. Since one of the qualities of an effective tax system is that it must be convenient, thus the location of tax office must be at the convenience of the taxpayer. In the same vein the forms to be completed must be simple for the taxpayer. It is worthwhile to note that the tax payers perceptions about this dimension are very critical for policy makers as far as generating revenue is concerned as it lacks one of the good attribute to tax system thereby impeding their willingness to honour their tax obligations to generate the needed tax revenue Another data collected revealed that, 75% of the taxpayers keep proper records and most of them have their records in books, computers and leaflets. For the rest they do not keep any records because they cannot afford to employ a professional. Some of them also said they do not see the need for it since they are not paying any tax, whiles other dont know to keep it themselves. 4.5.2 Certainty of the Tax System 29

Not Certain 13% Very Certain 37% Neutral 18%

C ertain 32%

Source: Researchers Field Survey, 2010 The diagram indicates the certainty of taxpayers. 32% respondents were certain and 37% of them were very certain. The responses for each sides clearly shows that they were certain about how much, when and where to pay the tax. 18% remained neutral. They do not support both side and 13% said they were not certain. They argued that the tax laws had not been available to them so they do not know their rights and obligations as regards taxation. It could be inferred that with 69% of the tax payers in the informal sector believing that they are very certain of the tax amount they must pay, it can be said that attribute of good tax system which is certainty is very effective. However, with 31% of respondents being neutral and uncertain about the tax amount they should pay, suggests that they might be lacking some significant education regarding the certainty of the tax system.


Fairness of Stamp Tax System

Very fair 38%

Not fair 5%

Nuetral 5%

Fair 52%


Source: Researchers Field Survey, 2009 From the chart, 52% agreed that the new tax system was fair to them. The rates each paid correspond with the income available to the taxpayer. 5% remains neutral. 38% also said it was very fair based on the edge of a payer. Another 5% said it was not fair because they only know what they are paying but do not know what others are paying due to the inability of getting information. From this data, it could be generalized that the tax payers perceive the tax system as fair. 4.5.4 Importance of Tax to you and the Nation

Not important, 2, 5%

Important, 13, 33%

Very important, 25, 62%

Source: Researchers Field Survey, 2010 The diagram shown that twenty five (25) respondent representing 62% of the taxpayers said taxes are very important to them and the nation because the government uses it to build the nation in terms of providing infrastructure such us schools, hospitals, etc. Thirteen (13) respondent representing 33% of the taxpayers said taxes are important to them and the nation, while only 5% did not see the need to collect taxes since the government does not use the tax for it intended purpose. Their reasons were that government officials use tax payers money for their on selfish interest instead of the entire nation interest citing New Patriotic Party (NPP) and National Democratic Congress (NDC) government officials blaming each other for embezzlement of state funds which tax revenue were main source of government revenue. 31

These views expressed by respondents argue that 95% considers the payment of tax as important and very important, which suggests that most of them are more likely to be willing to honour their tax obligations. 4.6 Measures to Ensure Tax Compliance in the Informal Sector From the questionnaires and interviews granted to both tax officials and taxpayers reveals that measures which can be instituted to ensure Tax compliance in the informal sector are summarized as follows: Intensive and regular field inspection Easy accessibility to tax office. Provision of relief and incentives to tax officials. Recruitment of more staff. Intensification of tax education campaigns all over the nation. Government to provide more logistics to tax officials. In-service training for tax collection personnel. Fair distribution of tax revenue. From the data analysis above findings were found to be set backs to the I.R.S.Adum District Office.



Introduction Conclusion drawn from the study and recommendation correcting some of the problems identified are presented in this chapter. These suggestions, it must be emphasized, are not final solution to the problem identified. At best, they are supplementary to other studies on this subject. 32



The problems associated with the informal sectors for tax purposes are numerous. While some of these problems can be attributed to these businesses, the tax laws and the working IRS are also contributory factors. In suggesting solution therefore, and attempt was made to draw in all the major players. This study shows that much tax revenue is lost in every year as a result of these problems. This should be of concern to all those interested in the development of the nation. The nation cannot afford leaving out the largest group of identifiable taxpayers in the face of limited resource. Solving their problems would be solving the nations problem which would result in much greater revenue for national development. 5.2 conclusions

The development of every country depends largely on the ability of the country to collect all taxes due to the country without any impediments. To ensure that all these taxes are collected efficiently and fairly, there is the need to do fair assessment of all taxpayers including informal sector. From the study, it came to light that the IRS is faced with many problems during the tax assessment. Some of which includes inadequacy of tax education, record keeping of Accounts and place of payment. However, recommendation given below aims at ensuring that solutions are been given to the various problems faced by the IRS. 5.3 recommendations

In the light of findings and the conclusions of the study, the following recommendations have been made to ensure effective and efficient tax assessment in the informal sector (small business). The tax authorities in collaboration with the various groupings these traders belong to; Can initiate the programme of teaching them basic book keeping.


A very simple record book may be designed for the traders in which they will record various transactions such as sales, purchases, expenses and drawings. If possible, such book may be distributed free of charge to the traders to ensure full participation of all. The IRS alone incapable of carrying out such a massive campaign. Accounting students from the various tertiary institutions could be mobilized during holidays to help in such a programme. There is the need to establish an appeal system so that disagreement could be easily ironed out. The present tax law provides for the establishment of tax tribunals but this has been materialized. Even if this tribunal had been established, it would have been fraught with legalities. A simple system may be put in place whereby for example, once a week, a senior officer of the IRS conduct appraisal sections right in the market places or localities of the traders. At such a session, an independent review of any disagreements that might have arisen with regard to assessment would be addressed. Knowledge is the product of education and since this is generally low among the informal sector, naturally the knowledge level is also low. This problem can only be solved through intensive public education campaigns. Public education must not only involve exhortation to pay taxes but must involve getting people to know how to go about paying their taxes. The mass media especially television is very suitable for educational programmes. Interesting and educative dramatized series on complying with the tax laws can be sponsored by the IRS. Taxation as a subject must be introduced in the curriculum of Junior and Senior High schools. Since majority of the informal sector can be labeled functional illiterates, laws reduced to everyday language for the understanding would preferable. Brochures in simple languages outlined a step - to step approach to complying with the tax laws should be made available to all tax payers. Recruitment and training procedures of personnel of the Internal Revenue Service should be strengthened. Proper training programmes would provide the tax officials themselves a better understanding of their organization and the relations and requirements of the individual jobs. 34

The study identifies the lack of needed logistics as another factor militating against the smooth operation of IRS; calculators, motor vehicles, stationery, computers and office accommodation readily come to mind. It is therefore important that adequate provision is made for these items. The convenient location of tax offices is an important issue that should be looked at. Some offices should be opened all over within the walking distances to taxpayers in the Kumasi Metropolis. This would be one compelling reason to visit the office from time to time to pay their tax. It is hoped that if the aforementioned recommendations are adhered to, it will go a long way to improve tax payment and the development of the country as a whole.

BIBLIOGRAPHY Aguiree Carlos A. Griff Peter S. and Yucelik Zutilu M, (1981), Tax Policy and Administration in Sub- Saharam Africa. Taxation in Sub- Africa. Washington DC. Page 6-41 Andah, P.O (1987), Ghana Income Tax Low and Practice, Volume 1, Seeko Publishing Ltd, Accra. Page35. Due John F, (1970), Indirect Taxation in Developing Economies, Taxation for Africa Development, the Johns Hopkins Press, London. Page 11-18. 35

Income Tax Decree SMCD5, (1995), and its subsequent Amendments to May, 1998. Internal Revenue Act 592, 2000, sections 39,129 V. Thuranyi, Presumptive Tax of the Hard-to Tax, in J. Alm (ed) Taxing the Hard-to Tax, Elsevier BV. E. Ahmad & Stern, The Theory and Practice of Tax Reform in Developing Countries, Cambridge University Press, 1991. Page 276. Obeng G. Goodwill Taxation on Ghana Laws (2000-2007).page 2. N.B.Menzo Theory and Practice of Taxation.

APPENDIX A QUESTIONNAIRE FOR TAX OFFICIALS The Researcher is a student from Christian Service University College researching on the topic increasing tax revenue of the Informal Sector. Any information provided shall be treated confidential and is for only academic purpose. Please kindly answer the questions as honestly as possible. 36

Tick [] where applicable: SECTION A Respondents Background information 1. Gender? Male [ ] Female [ ]

2. Grade/ Rank: .. 3. Schedule: Assessment [ ] Collection [ ] 6-10 Yrs. [ ] 11- 15 Yrs

4. Working Experience: 1- 5 Yrs. [ ]

SECTION B 1. In your opinion, how adequate has tax education been carried out through the media, radio and television? Not adequate [ ] Adequate [ ] Quite adequate [ ]

2. Do you find taxpayers education adequate? Quite Adequate [ ] Adequate [ ] Somehow Adequate [ ] Not at all adequate [ ]

3. Do you have adequate staff for field inspection, collection and monitoring? Quite Adequate [ ] Adequate 4. [ ] Somehow Adequate [ ] Not at all adequate [ ]

Do you have the adequate logistic for tax collection? Yes [ ] No [ ]

5. What form of education do you give to taxpayers? Formal [ ] Informal [ ] 37

6. How voluntarily do taxpayers pay their taxes? Not voluntary [ ] Somehow voluntary [ ] Very often voluntary [ ]

8. To what extent do you agree that businessmen and women disclose all sources of income to tax officials? (i) Disagree [ ] (ii) Agree [ ] (iii) Strongly agree [ ]

9. Are taxpayers punished or penalized for not paying taxes? Not punished [ ] Somehow punished [ ] Very often punished [ ]

10. Do businessmen and women keep proper records of accounts of their business? Yes [ ] No [ ]

11. What general problems do you normally encounter when collecting income tax from taxpayers? 1. 2. 3.. 4.. 5.. 12. What are the measures taking to solve the problems?.....................................................


13. What do you think can be done to make people more willing to pay their income tax? 14. What mechanism has been put in place to identify taxpayers who do not honor their tax obligation especially in the informal sector? .................................................................................................................................. ............................................................................................................................................... ............................................................................................................................................... ................ 15. In your opinion what are some of the benefit taxpayers derive from tax they pay? THANK YOU


The Researcher is a student from Christian Service University College researching on the topic Increasing tax revenue in the Informal Sector. Any information provided shall be treated confidential and is for only academic purpose. Please kindly answer the questions as honestly as possible. Tick [] where applicable: SECTION A BACKGROUND INFORMATION 1. Gender? Male [ ] Female [ ]

2. Age as at last birthday:

18Yrs- 30Yrs [ ] 41Yrs. - 50Yrs. [ ]

31Yrs. - 40Yrs. [ ] 51Yrs. - 60Yrs. [ ]

3. Marital Status Married [ ] Single [ ] Separated [ ] Divorced [ ] Widowed [ ]

4. Number of Dependant: None [ ] 1-2 [ ] 3-4 [ ] 4-6 [ ] More than 6 [ ]

5. Occupation/Business Trading [ ] Food processing [ ] Audio-visual workers [ ] Farming [ ] Beautician [ ] Others [ ] Transport [ ] Construction workers [ ] please specify.

6. What is your level of educational? No formal education [ ] Senior high school [ ] Primary school [ Tertiary [ ] 40 ] Junior high school [ ]

Other specify

SECTION B 1. How long have you been operating this business? Less than one (1) year 15 6 10 10 or more years 2. Have you registered your business? Yes [ ] No [ ] [ ] [ ] [ ] [ ]

3. In your opinion, how adequate has tax education been carried out through the media, radio and television? Not adequate [ ] Adequate [ ] Quite adequate [ ]

4. How sufficient is the tax education to you? Not sufficient Sufficient [ ] [ ]

Quite sufficient [ ] 5. How important is tax to you and the nation? Not important [ ] Important [ ]

Very important [ ] 6. How often do you pay your income tax? Never [ ] Not regular [ ] Regular [ ]

7. If not regular or never filed, then why? I. [ ] I can not fill the forms myself II. [ ] The processing takes too long a time. 41

III. [ ] IV. [ ]

Personal Low income

V. Specify . 8. What are your sources of income? ( Tick all that applies) [ ] Earnings from trade [ ] Gifts [ ] Part time work [ ] Allowances 9. Should field inspection, collection and monitoring be regular? Yes [ ] No [ ]

10. Do you keep records of your business transaction? Yes [ ] . No [ ]

11. If Yes, how do you keep record of transaction? [ ] Personally [ ] Leaflets [ ] Books [ ] Computer [ ] Mind 12. If No, please why? a. I do not know how to keep it myself [ ] b. I do not see any pressing need for that [ ] c. I cannot afford to employ a professional to do it [ ] d. Specify . 13. Is your place of location permanent or temporal? Permanent [ ] Temporal [ ]

14. How well do you co-operate with tax officials in the process of tax collection? Not cordial [ ] Cordial [ ] 42 Very cordial [ ]

15. Is the new stamp tax system better than the old tax system? Yes [ ] No [ ]

16. Are the rates of the stamp tax system fair? Not fair [ ] Neutral [ ] Fair [ ] Very fair [ ]

17. Are you certain about how much, when and where to pay the tax? Not certain [ ] Neutral [ ] Certain [ ] Very certain [ ] 18. How convenient is the location of the tax office to you? Not convenient [ ] Convenient [ ] Very convenient [ ]

19. How often do you to get receipt for payments you make to I.R.S? Never [ ] Sometimes [ ] Always [ ]

20. What general problems do you normally encounter with the tax officials? ... ... ... 21. What do you think can be done to make people more willing to pay their income tax?