Tax Reform In Ghana

For Peer Review

Tax Reforms and Revenue Mobilization in Ghana

Journal: Journal of Economic Studies

Manuscript ID: JES-01-2015-0007.R1

Manuscript Type: Research Paper

Keywords:

Tax reforms, Revenue Mobilization, Tax Buoyancy, Tax Elasticity,

Proportional Adjustment Approach, Ghana

Journal of Economic Studies

For Peer Review

1

1. Introduction

The aim of tax reforms is tended towards revenue sufficiency, equity, simplicity and economic efficiency. The need for tax reform arises from the deficiency of the existing tax system in achieving these objectives (see McMahon and Berrios, 1991). Tax reforms therefore have turned from a desired or preferred task to being a necessary one. According to Osoro (1993),

Overview of Tax Reforms Processes in Ghana The tax reform process in Ghana can broadly be divided into three overlapping phases namely, restoring the tax base, strengthening production incentives, enhancing tax efficiency and equity. The first phase of the tax reform process (that is, restoring the tax base, 1983-84), was designed largely to restore the tax base which had been totally eroded by the continuous over-valuation of the domestic currency and the large discrepancy between the official prices and market prices.

The move was expected to widen the tax net, reduce evasion and lower the tax burden. To start with, a multiple exchange rate system was introduced in April 1983. This system imposed surcharges on foreign exchange payments and bonuses on foreign exchange receipts, and effectively resulted in two exchange rates. Thereafter, the exchange rate was periodically adjusted. In addition to the exchange rate, the system for tax assessment for import duties, sales and purchase taxes were revised. Tax assessment for corporate income tax was as well changed from profits earned from previous year to actual income in the current year. Also the tradition

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