Impact of tax reforms on revenue mobilisation in developing economies: empirical evidence from Ghana

Abstract

PurposeThis paper assesses the impact of tax reforms on tax revenue mobilisation in Ghana.Design/methodology/approachThe autoregressive distributed lag model together with dynamic ordinary least squares and fully modified least squares techniques were employed on a time-series data spanning from 1980–2018. Exploiting data from IMFs monitoring of fund arrangements database, an index of tax reforms is constructed as a function of the number of successfully implemented tax-related reforms and policy measures per year over the study period.FindingsHaving established the presence of co-integration between tax revenue and its determinants, this paper finds strong evidence that tax-related reforms exert positive and significant impact on tax revenue generation in Ghana. Among other covariates, the results show that the tax base (real GDP), public debt and education (human capital index) significantly boosts tax revenue in the long run.Originality/valueThe success of tax reforms in boosting revenue mobilisation has been examined in light of the buoyancy and elasticity of the tax system in Ghana, albeit with little emphasis on the extent to which tax reforms contribute to tax revenue mobilisation from econometric perspective. This paper fills this gap in the literature by analysing the impact of tax reforms on tax revenue mobilisation in Ghana. As a recommendation, well-designed and implemented tax reforms and policies aimed at increasing the tax base, education and effective utilisation of funds from public debt promise to be instrumental in boosting tax revenue in Ghana.