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Tax burden, perceived fairness, and compliance in Ghana's tax system

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Listed:
  • Emmanuel Orkoh
  • Jörgen Levin

Abstract

Determining the optimal tax burden that maximizes compliance and revenue remains a major challenge in developing countries, partly due to the literature's focus on linear tax-compliance relationships. Using firm-level data from Ghana and an instrumental variable approach, this paper finds a nonlinear relationship: compliance rises with higher taxes up to a threshold of 45%, beyond which it declines. This threshold, more than double the average tax burden of 21%, varies by firm size and formality—medium-large firms (30%), micro (46%), small (49%), formal (41%), and semi-formal (46%).

Suggested Citation

  • Emmanuel Orkoh & Jörgen Levin, 2025. "Tax burden, perceived fairness, and compliance in Ghana's tax system," WIDER Working Paper Series wp-2025-91, World Institute for Development Economic Research (UNU-WIDER).
    • Handle: RePEc:unu:wpaper:wp-2025-91
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    References listed on IDEAS

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    3. Prianto Budi Saptono & Gustofan Mahmud & Fauzilah Salleh & Intan Pratiwi & Dwi Purwanto & Ismail Khozen, 2024. "Tax Complexity and Firm Tax Evasion: A Cross-Country Investigation," Economies, MDPI, vol. 12(5), pages 1-36, April.
    4. Koomson, Isaac & Orkoh, Emmanuel & Ahmad, Shabbir, 2023. "Non-farm entrepreneurship, caste, and energy poverty in rural India," Energy Economics, Elsevier, vol. 127(PA).
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