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Tax Elasticity in Sierra Leone: A Time Series Approach

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  • Brima Ibrahim Baimba Kargbo

    (National Social Security and Insurance Trust, Sierra Leone)

  • Adegbemi Festus O. Egwaikhide

    (Department of Economics, University of Ibadan, Nigeria)

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    Abstract

    The fiscal authorities in Sierra Leone introduced series of reforms in the tax system ranging from continual revisions in tax rate to harmonization and instituting new taxes that are relatively easy to collect. Despite these measures, the output of the tax system as measured by the tax/GDP ratio remains very low averaging 11 per cent contributing to higher fiscal deficits. This study examined the base elasticity of the tax system in Sierra Leone and its major handles using annual data covering the period between 1977and 2009.The Singer method of dummy variables was employed in order to make adjustment for the effect of discretionary tax measures and then compare buoyancy and elasticity measures. The empirical results indicated that buoyancy estimates were higher than elasticity estimates; and that short-run elasticities were lower than the static long-run elasticities. Estimation results further showed that discretionary tax measures were effective in mobilizing additional tax revenues and that the tax system was inelastic during the period.

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    Bibliographic Info

    Article provided by Econjournals in its journal International Journal of Economics and Financial Issues.

    Volume (Year): 2 (2012)
    Issue (Month): 4 ()
    Pages: 432-447

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    Handle: RePEc:eco:journ1:2012-04-6

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    Web page: http://www.econjournals.com

    Related research

    Keywords: Tax elasticity; Tax Buoyancy; Tax Revenue; Sierra Leone;

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    7. Nurun N. Choudhry, 1979. "Measuring the Elasticity of Tax Revenue: A Divisia Index Approach (Mesure de l'élasticité automatique des recettes fiscales: une méthode dérivée de l'indice Divisia) (Medición de la ," IMF Staff Papers, Palgrave Macmillan, vol. 26(1), pages 87-122, March.
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    9. Osoro, N.E., 1995. "Tax Reforms in Tanzania: Motivations, Directions and Implications," Papers, African Economic Research Consortium 38, African Economic Research Consortium.
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    11. Paul Johnson & Peter Lambert, 1989. "Measuring the responsiveness of income tax revenue to income growth: a review and some UK values," Fiscal Studies, Institute for Fiscal Studies, Institute for Fiscal Studies, vol. 10(4), pages 1-18, November.
    12. Ariyo, A., 1997. "Productivity of the Nigerian Tax System: 1970-1990," Papers, African Economic Research Consortium 67, African Economic Research Consortium.
    13. Rasheed, Farooq, 2006. "An analysis of Tax Buoyancy Rates in Pakistan," MPRA Paper 43388, University Library of Munich, Germany, revised 01 Jul 2006.
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