The influence of financial literacy and perceived fairness on tax compliance behaviour: Examining the mediating effect of trust in tax authorities in Ghana

Abstract

Tax non-compliance remains a critical constraint to domestic revenue mobilization in Ghana, despite decades of tax reforms, modernization initiatives, and taxpayer education campaigns. To deepen the understanding of behavioural and institutional drivers of compliance, this study examines how tax-specific financial literacy and perceived tax fairness shape self-reported tax compliance behaviour, with trust in tax authorities serving as a key mediating mechanism. Drawing on the Theory of Planned Behaviour and the Slippery Slope Framework, the study employed Partial Least Squares Structural Equation Modelling (PLS-SEM) to analyse survey data from 1342 enterprises across micro, small, medium, and large-scale businesses in Ghana. The findings reveal that both tax-specific financial literacy and perceived tax fairness exert a significant positive effect on compliance, while trust in tax authorities partially mediates these relationships. This demonstrates that voluntary compliance is more effectively sustained when cognitive competence is complemented by perceptions of institutional legitimacy and fairness. The study makes a theoretical contribution by integrating cognitive and relational determinants of tax behaviour into a unified behavioural-institutional model tailored to developing economy contexts. Practically, it underscores the need for targeted tax literacy initiatives, transparent and equitable tax administration, and deliberate trust-building strategies to strengthen voluntary compliance and reduce reliance on coercive enforcement. The results provide actionable insights for revenue authorities and policymakers seeking to broaden Ghana's tax base through behavioural and institutional levers, and offer a replicable analytical framework for other Sub-Saharan African countries facing similar compliance challenges.