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Determinants of Tax Evasion in Ghana: 1970-2010

Author

Listed:
  • Betty Annan

    (Department of Economics, University of Ghana, Box LG 57, Legon, Acca, Ghana)

  • William Bekoe

    (Department of Economics, University of Ghana, Box LG 57, Legon, Acca, Ghana)

  • Edward Nketiah-Amponsah

    (Department of Economics, University of Ghana, Box LG 57, Legon, Acca, Ghana)

Abstract

This paper investigates the factors that determine tax evasion in Ghana using time series data covering the period 1970-2010. Employing the currency demand approach, we obtained the estimates of the shadow economy and the level of tax evasion for the entire period. Using the bounds test technique of cointegration we found that the variables included in our ARDL model are bounded together. The short-run model indicates that per capita income, the average tax rate, age and inflation were positively and significantly associated with tax evasion while gender showed an inverse and significant relationship with tax evasion. The error correction term was negative, statistically significant and suggests that 45 per cent of the deviation from equilibrium tax evasion is corrected each year. In addition, the Granger causality test indicates that tax and inflation rates aid in predicting future levels of tax evasion in Ghana. The paper further discusses the policy implications of the findings.

Suggested Citation

  • Betty Annan & William Bekoe & Edward Nketiah-Amponsah, 2013. "Determinants of Tax Evasion in Ghana: 1970-2010," International Journal of Business and Economic Sciences Applied Research (IJBESAR), International Hellenic University (IHU), Kavala Campus, Greece (formerly Eastern Macedonia and Thrace Institute of Technology - EMaTTech), vol. 6(3), pages 97-121, December.
    • Handle: RePEc:tei:journl:v:6:y:2013:i:3:p:97-121
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    References listed on IDEAS

    as
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    Cited by:

    1. Erstu Tarko Kassa, 2021. "Factors influencing taxpayers to engage in tax evasion: evidence from Woldia City administration micro, small, and large enterprise taxpayers," Journal of Innovation and Entrepreneurship, Springer, vol. 10(1), pages 1-16, December.

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    More about this item

    Keywords

    tax evasion; bounds testing; error correction; granger causality; Ghana;
    All these keywords.

    JEL classification:

    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development

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