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Is the Burden Too Small? – Effective Tax Rates in Ghana

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  • David Nguyen-Thanh
  • Christoph Strupat

    ()

Abstract

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.

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File URL: http://repec.rwi-essen.de/files/REP_12_389.pdf
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Bibliographic Info

Paper provided by Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen in its series Ruhr Economic Papers with number 0389.

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Length: 28 pages
Date of creation: Dec 2012
Date of revision:
Handle: RePEc:rwi:repape:0389

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Keywords: Effective tax rates; tax holidays; Ghana;

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  1. Alexander Klemm & Dennis P. J. Botman & Reza Baqir, 2008. "Investment Incentives and Effective Tax Rates in the Philippines," IMF Working Papers 08/207, International Monetary Fund.
  2. Alexander Klemm & Stefan Parys, 2012. "Empirical evidence on the effects of tax incentives," International Tax and Public Finance, Springer, vol. 19(3), pages 393-423, June.
  3. Zee, Howell H. & Stotsky, Janet G. & Ley, Eduardo, 2002. "Tax Incentives for Business Investment: A Primer for Policy Makers in Developing Countries," World Development, Elsevier, vol. 30(9), pages 1497-1516, September.
  4. Alexander Klemm, 2008. "Effective Average Tax Rates for Permanent Investment," IMF Working Papers 08/56, International Monetary Fund.
  5. Junhyung Park & Sukhmani Bedi & S. M. Ali Abbas & Alexander Klemm, 2012. "A Partial Race to the Bottom," IMF Working Papers 12/28, International Monetary Fund.
  6. Stefan Parys & Sebastian James, 2010. "The effectiveness of tax incentives in attracting investment: panel data evidence from the CFA Franc zone," International Tax and Public Finance, Springer, vol. 17(4), pages 400-429, August.
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