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CHAPTER ONE
INTRODUCTION
Background of the study
Tax income is critical for both developed and developing nations’ long-term viability. To begin with, taxation is the primary source of revenue for the federal government, since tax collection is obligatory and consistent, ensuring financial stability. Second, through providing public goods and services, taxes seeks to satisfy social and public requirements. Third, the government need tax money in order to create military forces and judicial systems to guarantee the society’s security and justice. A low tax-revenue-to-GDP ratio hinders many impoverished developing countries from implementing large-scale spending plans. As a result, a policy goal is a fast rise in domestic income and commensurate increases in public services. Increased government expenditure and taxation, on the other hand, should be approached with caution, since distortionary taxes tend to stifle development once they reach certain levels: tax bases are not just ‘given’ to governments; they may be expanded or destroyed (Berker, 2008). 1 The optimal tax-to-GDP ratio is a philosophical as well as a technical issue. Various political views will have different objectives in terms of public spending, implying different taxation amounts. Indeed, tax revenue-to-GDP ratios vary greatly by area. Table 1 shows how the tax-to-GDP ratio has evolved among areas between 1990 and 2005. During this time, the tax-to-GDP ratio in Western Europe rose from 38% to about 41%. Despite the fact that low-income nations have a lower average tax-to-GDP ratio, there is a wide range of tax-to-GDP ratios within the category. In the Middle East/North Africa and South Asia, however, collections were largely steady at 14 and 11-12 percent, respectively. The tax-to-GDP ratio in East Asia and the Pacific rose from 21% to almost 30%. In SSA and Latin America, performance has improved somewhat, with total tax collection increasing from 16-17 percent in 1990 to 19 percent in 2005. It’s worth noting that SSA’s average tax-to-GDP ratio is greater than that of the Middle East/North Africa and South Asia. Only East Asia and the Pacific has seen a significant rise in the tax-to-GDP ratio. Other emerging areas, especially SSA, continue to do poorly on average. While Africa’s tax revenue share trend has been disappointing, resource-rich countries have seen a substantial rise in domestic income since 2004. (OECD 2010). In 2005, income from resource taxes amounted to almost 10% of GDP, which is nearly equal to the entire amount of assistance given to Sub-Saharan Africa. Revenue mobilization has been rising at a rate of about 3% per year in resource-rich economies. This has been mostly driven by resource-related tax receipts, which usually divert governments’ attention away from more politically difficult types of taxation. Revenues in non-resource-rich economies increased by 1.4 percent each year. They have been more effective in increasing the quality and balance of their tax mix than resource-rich nations. Non-resource-related tax revenues have dwindled, but indirect, direct, and trade taxes have grown in importance. As a result, oil-producing nations are mainly responsible for the continent’s extraordinary increase in average tax shares, while non-oil producers have made the greatest success in expanding the tax base.
Statement of the problem
The money obtained by governments via taxation is referred to as tax revenue. The main source of government revenue is taxation. Individuals, public businesses, commerce, royalties on natural resources, and/or foreign assistance are all potential sources of revenue. In nations with high levels of poverty, a significant agricultural economy, and substantial amounts of foreign assistance, ineffective tax collection is more common. Tax revenue is collected in a variety of ways, and the agency that collects it may not be part of the central government, but rather a third company licensed to collect tax that they will utilize. However, the Ghanaian tax system has many problems and obstacles, including multiple taxes, inefficient administration, database inaccessibility, tax touting, the complexity of Ghanaian tax laws, minimum tax, commencement, change of accounting date and cessation, and non-payment of tax refunds. The research will address An ascertainment of Tax Revenue Determinants Evidence From Ghana within this backdrop.
Objective of the study
The primary objective of the study is as follows
i. To examine the effect of tax revenue determinants on tax revenue growth in Ghana.
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ii. To examine tax policy decision on significant determinants that drive tax revenue growth.
iii. To provide a basis to re-look at the adoption of multiplicity of taxes policy to drive tax revenues.
iv. To find out how generation of tax revenue can be improved upon in Ghana
Research Questions
The following questions have been prepared for the study
i. What are the effect of tax revenue determinants on tax revenue growth in Ghana?
ii. Are tax policy decision on significant determinants contribute to tax revenue growth?
iii. Can there be a re-look at the adoption of multiplicity of taxes policy to drive tax revenues?
iv. Can generation of tax revenue be improved upon in Ghana?
Significance of the study
The significance of this study cannot be underestimated as:
l This study will examine An ascertainment of Tax Revenue Determinants (Evidence From Ghana)
l The findings of this research work will undoubtedly provide the much needed information to government organizations, Ghana revenue authority and academia
Scope of the study
This study will examine Tax Revenue Determinants Evidence From Ghana. The study will also, examine the effect of tax revenue determinants on tax revenue growth in Ghana. Including tax policy decision on significant determinants that drive tax revenue growth.furthermore. Hence it will be delimited to staff of the Ghana revenue authority
Limitation of the study
This study was constrained by a number of factors which are as follows:
just like any other research, ranging from unavailability of needed accurate materials on the topic under study, inability to get data
Financial constraint , was faced by the researcher ,in getting relevant materials and in printing and collation of questionnaires
Time factor: time factor pose another constraint since having to shuttle between writing of the research and also engaging in other academic work making it uneasy for the researcher
Definition of terms
Tax revenue: the funds collected from taxes on income and profits; Social Security taxes or “contributions
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