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

  • David Nguyen-Thanh
  • Christoph Strupat

    ()

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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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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  1. 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.
  2. S. Abbas & Alexander Klemm, 2013. "A partial race to the bottom: corporate tax developments in emerging and developing economies," International Tax and Public Finance, Springer, vol. 20(4), pages 596-617, August.
  3. 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.
  4. Alexander Klemm & Dennis P. J. Botman & Reza Baqir, 2008. "Investment Incentives and Effective Tax Rates in the Philippines; A Comparison with Neighboring Countries," IMF Working Papers 08/207, International Monetary Fund.
  5. A. Klemm & S. Van Parys, 2010. "Empirical Evidence on the Effects of Tax Incentives," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 10/673, Ghent University, Faculty of Economics and Business Administration.
  6. Alexander Klemm, 2008. "Effective Average Tax Rates for Permanent Investment," IMF Working Papers 08/56, International Monetary Fund.
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