Title: The links between economic growth and tax revenue in Ghana: an empirical investigation

Authors: Wisdom Takumah; Bernard Njindan Iyke

Addresses: Department of Economics, University of Ghana, Private Mail Bag, 00233, Accra, Ghana ' Department of Economics, University of South Africa, P.O. Box 392, UNISA, 0003, Pretoria, South Africa

Abstract: This paper explores the causal influence of tax revenue on economic growth in Ghana. The causality analysis builds on a multivariate setup, allowing for key control variables to intermediate the nexus between tax revenue and economic growth. This enables the paper to overcome variable omission bias, allowing for efficient estimates of the test statistics of the Granger causality. In addition, the paper employs the Toda-Yamamoto test instead of the conventional Granger causality test to avoid pre-testing bias. Using a quarterly dataset which spans the period 1986Q1-2014Q4, we find strong evidence of unidirectional causal flow from tax revenue to economic growth in Ghana. This finding agrees with the existing finding that taxation can influence economic growth. The implication for policy is that the tax scope of the country should be expanded in order to increase the revenue from taxation.

Keywords: causality; economic growth; tax revenue; Ghana; Toda-Yamamoto test.

DOI: 10.1504/IJSE.2017.080856

International Journal of Sustainable Economy, 2017 Vol.9 No.1, pp.34 - 55

Received: 10 Nov 2015
Accepted: 29 Apr 2016
Published online: 09 Dec 2016 *

Full-text access for editors Full-text access for subscribers Purchase this article Comment on this article