An Estimation of the Taxable Capacity, Tax Effort and Tax Burden of an Emerging Economy: Evidence From Ghana

Abstract

This paper estimates taxable capacity, tax effort and tax burden with a view to examining the tax fairness perceptions and tax system efficiency. The study employed ordinary least squares regression and vector autoregressive model for historical time series data sourced from the World Development Indicators and Bank of Ghana. We found that Ghana's overall tax burden and average post-tax reform efforts are low suggesting tax fairness and tax system inefficiency respectively. We conclude that post-tax reform dispensation has not generated the much-needed tax revenues because of low tax efforts. Thus, tax revenue could be significantly maximized to aid the achievement of the sustainable development goals to move Ghana Beyond Aid. This paper extends literature by relying on estimates of taxable capacity, tax effort and tax burden to assess the tax fairness perceptions and tax administrative efficiency of an emerging economy. We posit that these triad terminologies move pari passu in assessing the efficiency and fairness of a country's tax system. We recommend that embarking on jurisdictional tax reforms should not only be about appropriate and a plethora of tax laws and multiplicity of taxes but also on the efficiency and integrity of tax administration. The judicious use and prompt accountability of tax revenues could help address tax unfairness perceptions in emerging economies.

Taxable Capacity and Tax Effort: An Analysis for Pakistan

“…As a result, collection of tax revenues falls. The results regarding inflation are similar to the findings of Gaalya, (2015) and Amoh, (2019).…”

Pengaruh Transfer Pemerintah Pusat terhadap Tax Effort Kabupaten/Kota di Provinsi Sumatera Barat

“…Salah satu upaya yang dilakukan untuk mengukur sejauh mana kinerja fiskal pemerintah dalam mengoptimalkan penerimaan pajak dapat dilihat berdasarkan besaran rasio Tax Effort suatu negara maupun daerah (Ciro et al, 2018). Tax Effort yang diturunkan dari rasio pajak terhadap PRDB juga dapat digunakan pemerintah sebagai alat yang berguna untuk memotivasi kebijakan fiskal pemerintah tentang seberapa banyak upaya maupun usaha tambahan yang perlu dilakukan oleh pemerintah guna memenuhi tujuan pengembangan dan pembangunan wilayahnya (Amoh, 2019;Ciro et al, 2018;IMF, 2007).…”

“…Tax Effort juga menggambarkan bagaimana penerimaan pajak suatu daerah, semakin tinggi rasio Tax Effort suatu daerah maka semakin tinggi pula penerimaan pajak daerah. (Amoh, 2019).…”

Reviewing Local Revenue Capacity in Indonesia

“…According to Langford and Ohlenburg (2016), tax potential is inherently observable but empirically predictable. Some studies use economic factors to influence tax capacity, including Gross Regional Domestic Product (GDP) per capita (Andriany and Qibthiyyah, 2018;Bousselhami and Hamzaoui, 2018;Ramadhani and Nugroho, 2019), economic activity by looking at the role of economic sectors (agriculture, manufacturing, mining, finance, trade, and services) in the formation of GDP (Amoh, 2019;Bashayreh and Oran, 2016;Ramadhani and Nugroho, 2019), inflation (Amoh, 2019), monetary level (Bousselhami and Hamzaoui, 2018) and economic openness (Al-Freijat and Adeinat, 2020;Bashayreh and Oran, 2016). Some studies use non-economic factors such as tax administration (Andriany and Qibthiyyah, 2018), population growth rate (Amoh, 2019), the number of per-capita high school students (Alfirman, 2003), the quality of government (Atsan, 2017).…”

“…Number of Motor Vehicles By Type in Indonesia, 2015-2019 It turns out that the number of households that manage agricultural businesses with the aim of part or all of the proceeds for sale sourced from their businesses or owned by others also does not have a positive impact on the increasing realization of Local Own-…”