Is the burden too small? Effective tax rates in Ghana

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Nguyen-Thanh, David / Christoph Strupat
External Publications (2012)

Bochum: Ruhr-Universität Bochum (RUB), Department of Economics (Ruhr Economic Papers 389)

This paper examines capital income taxation in Ghana. We calculate effective marginal tax rates (EMTR) and effective average tax rates (EATR) using an extended Devereux-Griffith methodology to accommodate for tax incentives – an exercise that has not been done so far for Ghana. We find that the wide range of tax incentives leads to a high variation of effective average tax rates in Ghana. Tax holidays and preferential income tax rates lower the effective tax burden to a significant extent and encourage individual tax avoidance strategies. Furthermore our results confirm previous findings that tax holidays, effectively reducing EATR, favor high-profit short-lived investment projects raising doubts about their rationale.