Taxation of the Informal Sector in Ghana

Generating enough revenue to support the administration of any economy has been a major problem of invariably every nation.The informal sector which forms part of the largest sectors of the economy especially for developing countries is known to pose such challenges which impede the adequate and effective collection of tax revenue.This study investigated the challenges of taxing the informal sector of the economy and the prospects therein that can be made in expanding tax derivation from the sector.Findings made included the awareness of the informal sector to pay taxes in general taking cognizance of the fact that many are not conversant with the requirements for settling taxes and hold the perception that fulfilling tax obligations is not their responsibility.Furthermorethe lack of statistical database of businesses in the informal sectorthe impermanency and fluidity of businessesthe lack of authentic residential addresspoor level of record keepingand the lack of incentives for tax officers were found to be the major challenges crippling tax derivation from the informal sector of the economy.Level of education of respondents was also found to significantly influence tax.