This study investigates the economic and behavioural determinants of tax evasion by Small and Medium Enterprises (SMEs) in Ghana, along with the moderating effect of religiosity. The data for this study was sourced from a sample of 392 SMEs responding at a response rate of 78.4% using a questionnaire administered to business owners, CEOs, finance managers, accountants, and tax managers. The results indicate that larger and older businesses evade taxes less, but higher tax liabilities result in more evasion. Economic factors both tax rate and the complexity of the system exert positive effects on evasion, while deterrence sanctions exert counter-evading effects. Behavioural factors such as perceptions of tax fairness, non-compliance opportunities, and compliance costs exert significant influences on the tendency to evade taxes. Furthermore, higher owner religiosity is associated with reduced evasion; hence, it underlines the role of religious beliefs on compliance behaviour. Moreover, it was found that most of the interaction of owners’ religiosity with economic and behavioural factors were insignificant, and thus, the evidence in determining tax evasion remain unaltered with some few exceptions in tax fairness, tax non-compliance opportunity, and tax compliance cost, which were also statistically insignificant after the interaction. Results are in line with the theory of planned behaviour in that perceived control, subjective norms, and attitudes towards compliance all contribute to intention.
Keywords: Tax evasion, economic factors, behavioural factors, religiosity, SMEs, Ghana