Financial Literacy and VAT Payers’ Perception of Compliance in Ghana: Evidence from the Moderating Effects of Patriotism

This study explored the drivers of VAT compliance among Ghanaian business owners, focusing on the role played by financial literacy, perceived usefulness of VAT, customer pressure, and patriotism. A purposive sample of 560 small business operators provided the relevant primary data collected through the administration of structured questionnaires. The PLS-SEM approach was used for data analysis in testing the hypothesized relationships. The findings show that financial literacy, perceived usefulness of VAT, and customer pressure had a significant positive influence on VAT compliance. The strongest predictor was perceived VAT relevance, while patriotism plays a significant moderating role in each of the three relationships. These findings contribute to the literature by highlighting the role of patriotism as a moderating factor, offering novel insights into how national sentiment can enhance tax compliance behaviour. Tax authorities could leverage the practical benefits of VAT to improve compliance through effective tax education, communication, and sensitisation. Financial literacy must be enhanced by equipping business owners with the necessary skills for efficient compliance with VAT requirements. This paper adds to the burgeoning literature on tax compliance by bringing both rational and affective components into a single frame, especially by illustrating the moderating effect of patriotism.