Tax as a Stimulus for Growth and Development in Ghana
CHAPTERT ONE
Objectives of the Study
Broadly, the objective of this study is to identify the impact of tax revenue on the Ghanaian economic growth and development. Other specific objectives include:
- To investigate the impact of company income tax on the growth of the economy of Ghana.
- To investigate the impact of custom and excise duties on the growth of the economy of Ghana.
- To investigate the impact of value added tax on the growth of the economy of Ghana
CHAPTER TWO LITERATURE REVIEW
Introduction
This chapter will be used by the researcher to assess the previous works of relevant authors on topics related to this study. The researcher will conduct research under the following headings.
· Conceptual Framework
· Review of Empirical Literature
· Theoretical Framework
The whole essence of tax revenue is to generate revenue to advance the welfare of the people of a nation with focus on promoting economic growth and development of a country through the provision of basic amenities for improved public services via proper administrative system, and structures. Tax revenue plays a crucial role in promoting economic activity growth and development. Through tax revenue, government ensures that resources are channeled towards important projects in the society, while giving succor to the weak. The role of tax revenue in promoting economic activity and growth may not be felt if poorly administered. This calls for a need for proper examination of the relationship between revenue generated from taxes and the economy, to enable proper policy formulation and strategy towards its efficiency. A critical challenge before tax administration in the 21st century Ghana is to advance the frontiers of professionalism, accountability and awareness of the general public on the imperatives and benefits of tax revenue in our personal and business lives which include: promoting economic activity; facilitating savings and investment; and generating strategic competitive advantage. If tax administration does not for any reason meet the above challenges, then there is a desperate need for reform in the area of the tax regime, and in the administration of taxes.
A country‘s tax system is a major determinant of other macroeconomic indexes, specifically, for both developed and developing economies; there exists a relationship between tax structure and the level of economic growth and development. Indeed, it has been argued that the level of economic growth has a very strong impact on a country‘s tax base (Kiabel, 2009, and Vincent, 2001), and tax policy objectives vary with the stages of development. Similarly, the economic criteria by which a tax structure is to be judged and the relative importance of each tax source vary over time (Vincent, 2001). For example, during the colonial era and immediately after the Ghana‘s political independence in 1960, the sole objective of tax revenue was to raise revenue. Later on, emphasis shifted to the infant industries protection and income redistribution objectives. In his discussion of the relationship between tax structure and economic development, (Vincent, 2001) divided the period of economic development into two, the early period when an economy is relatively underdeveloped and the later period when the economy is developed. During the early period, there is limited scope for the use of direct taxes because the majority of the populace resides in the rural areas and is engaged in subsistence agriculture. Because their incomes are difficult to estimate, tax assessment at this stage is based on presumptions prone to wide margins of error.
CHAPTER THREE
RESEARCH METHODOLOGY
Introduction
This chapter gives the methodology employed in the study, involving a discussion of data collection analysis techniques. Against this background, this chapter presents the research design, methods of data collection and techniques analysis of data to be used in the study. Effort is made to describe different tools or techniques employed while analyzing the work. The research focuses on tax as a stimulus for growth and development in Ghana.
Research Design
A research design is the framework or the plan of study that is used as a guide in collecting data and analyzing the data. Also, research design is the plan and structure of investigation conceived so as to obtain answers to research questions. In order words research design is the base method or a tool that is applied in the collection of data that is relevant to provide solution to the research problem (Ndagi 1999).
This study will adopt the Ex post facto method of research. This is because data needed for analysis already exists. The study will cover Ghana‘s economy with time series rather than cross-sectional data being used. Data relating to revenues from different tax components, investment expenditure and GDP will be collected for the years 1981-2010. The study will use Vector Error Collection Model (VECM) to examine the relationship between taxation and the Ghanaian economy which will be measured using its Gross Domestic Product (GDP).
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