IDEAS home Printed from https://ideas.repec.org/a/trp/01jefa/jefa0044.html
   My bibliography  Save this article

Real Gross Domestic Product as Value Added Tax Base: Evidence from Ghana

Author

Listed:
  • Michael Safo OFORI

    (Blue Crest University College)

Abstract

Total Private Consumption is the ideal Valued Added Tax base for Valued Added Tax revenue modelling and forecasting. However, data on private consumption expenditure is not available in most developing countries. With this reason, this study aims to study the appropriateness of real Gross Domestic Product as a Valued Added Tax base by testing the correlation between Valued Added Tax Revenue and Real Gross Domestic Product. It further examines the elasticity of Valued Added Tax revenue to changes in real Gross Domestic Product of Ghana. It is realized from the study that a one percent increase in real Gross Domestic Product results in a 3.7337 percent increase in Total Valued Added Tax revenue. Also, a, high correlation of 0.9365 is realized between real Gross Domestic Product and Total Valued Added Tax revenue. Since monthly and/or quarterly data on private consumption expenditure is not available in Ghana, real Gross Domestic Product can be used as VAT base (especially in VAT revenue modelling and forecasting) because of the high correlation and elasticity between Value Added Tax revenue and real Gross Domestic Product. Sequel to these, the study recommends that the government of Ghana implements supply-side policies that will boost investment and production, reduce imports and encourage import substitution, and also demand-side policies that will increase aggregate demand. These policies will expedite rapid economic growth, and an increase in Value Added Tax revenue will be a consequent result.

Suggested Citation

  • Michael Safo OFORI, 2021. "Real Gross Domestic Product as Value Added Tax Base: Evidence from Ghana," Journal of Economics and Financial Analysis, Tripal Publishing House, vol. 5(1), pages 43-63.
    • Handle: RePEc:trp:01jefa:jefa0044
    DOI: 10.1991/jefa.v5i1.a40
    as

    Download full text from publisher

    File URL: http://ojs.tripaledu.com/index.php/jefa/article/download/61/73
    Download Restriction: no
    File URL: https://libkey.io/10.1991/jefa.v5i1.a40?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Michael Keen, 2013. "The Anatomy of the Vat," National Tax Journal, National Tax Association;National Tax Journal, vol. 66(2), pages 423-446, June.
    2. Chun-Yan Kuo, 2000. "Estimation of Tax Revenue and Tax Capacity," Development Discussion Papers 2000-08, JDI Executive Programs.
    3. Andrea Gebauer & Chang Woon Nam & Rüdiger Parsche, 2007. "Can Reform Models of Value Added Taxation Stop the VAT Evasion and Revenue Shortfalls in the EU?," Journal of Economic Policy Reform, Taylor and Francis Journals, vol. 10(1), pages 1-13.
    4. James Alm & Asmaa El-Ganainy, 2013. "Value-added taxation and consumption," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 20(1), pages 105-128, February.
    5. Kusi, N.K., 1998. "Tax Reform and Revenue Productivity in Ghana," Papers 74, African Economic Research Consortium.
    6. Roshan Bajrachava & Chun-Yan Kuo, 2000. "Tax Revenue Estimation in Ghana," Development Discussion Papers 2000-07, JDI Executive Programs.
    7. Bird, Richard M. & Martinez-Vazquez, Jorge & Torgler, Benno, 2008. "Tax Effort in Developing Countries and High Income Countries: The Impact of Corruption, Voice and Accountability," Economic Analysis and Policy, Elsevier, vol. 38(1), pages 55-71, March.
    8. repec:aer:wpaper:74 is not listed on IDEAS
    9. Bird,Richard & Gendron,Pierre-Pascal, 2011. "The VAT in Developing and Transitional Countries," Cambridge Books, Cambridge University Press, number 9781107401440, January.
    10. repec:aer:wpaper:20 is not listed on IDEAS
    11. Sokolovska, Olena & Sokolovskyi, Dmytro, 2015. "VAT efficiency in the countries worldwide," MPRA Paper 66422, University Library of Munich, Germany.
    12. Luiz de Mello, 2009. "Avoiding the Value Added Tax," Public Finance Review, , vol. 37(1), pages 27-46, January.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Michael Safo OFORI & Abel FUMEY & Edward NKETIAH-AMPONSAH, 2020. "Forecasting Value Added Tax Revenue in Ghana," Journal of Economics and Financial Analysis, Tripal Publishing House, vol. 4(2), pages 63-99.
    2. Joaquim Sarmento, 2016. "The Determinants Of Value Added Tax Revenues In The European Union," Portuguese Journal of Management Studies, ISEG, Universidade de Lisboa, vol. 21(2), pages 79-99.
    3. Kodjo Adandohoin, 2021. "Tax transition in developing countries: do value added tax and excises really work?," International Economics and Economic Policy, Springer, vol. 18(2), pages 379-424, May.
    4. Santiago Acosta-Ormaechea & Atsuyoshi Morozumi, 2021. "The value-added tax and growth: design matters," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 28(5), pages 1211-1241, October.
    5. Romain Houssa & Kelbesa Megersa, 2017. "Institutional quality, economic development and the performance of VAT," BeFinD Working Papers 0115, University of Namur, Department of Economics.
    6. Adandohoin, Kodjo, 2018. "Tax transition in developing countries: Do VAT and excises really work?," MPRA Paper 91522, University Library of Munich, Germany.
    7. Sijbren Cnossen, 2015. "Mobilizing VAT revenues in African countries," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 22(6), pages 1077-1108, December.
    8. Naoufel Mahfoudh & Imen Gmach, 2021. "The Effects of Fiscal Effort in Tunisia: An Evidence from the ARDL Bound Testing Approach," Economies, MDPI, vol. 9(4), pages 1-20, December.
    9. Ahmad Farhan Alshira’h & Moh’d Alsqour & Abdalwali Lutfi & Adi Alsyouf & Malek Alshirah, 2020. "A Socio-Economic Model of Sales Tax Compliance," Economies, MDPI, vol. 8(4), pages 1-15, October.
    10. Angelica BACESCU-CARBUNARU & Monica CONDRUZ-BACESCU, 2011. "The Interdependence between the Level of Domestic Prices and the Price Level in the Developed Countries," REVISTA DE MANAGEMENT COMPARAT INTERNATIONAL/REVIEW OF INTERNATIONAL COMPARATIVE MANAGEMENT, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 12(3), pages 420-431, July.
    11. MAIMOUNA DIAKITE & Jean-François BRUN, 2016. "Tax Potential and Tax Effort: An Empirical Estimation for Non-Resource Tax Revenue and VAT’s Revenue," EcoMod2016 9537, EcoMod.
    12. Sijbren Cnossen, 2017. "VAT and Agriculture: Lessons from Europe," CPB Discussion Paper 341, CPB Netherlands Bureau for Economic Policy Analysis.
    13. Fikri R. Arrachman & Riatu M. Qibthiyyah, 2018. "The Relationship of VAT Rate and Revenues in the Case of Informality," Economics and Finance in Indonesia, Faculty of Economics and Business, University of Indonesia, vol. 64, pages 73-96, Juni.
    14. Jorge Martinez-Vazquez & Richard M. Bird, 2011. "Value-Added Tax: Onward and Upward?," Chapters, in: Emilio Albi & Jorge Martinez-Vazquez (ed.), The Elgar Guide to Tax Systems, chapter 6, Edward Elgar Publishing.
    15. Richard M. Bird, 2012. "The GST/HST: Creating an Integrated Sales Tax in a Federal Country," SPP Research Papers, The School of Public Policy, University of Calgary, vol. 5(12), March.
    16. Christou Anna & Eriotis Nikolaos & Lomis Ioannis & Papadakis Spyros & Thalassinos Eleftherios, 2021. "The Greek VAT Gap: The Influence of Individual Economic Sectors," European Research Studies Journal, European Research Studies Journal, vol. 0(4B), pages 851-882.
    17. Antonio Gómez Gómez-Plana & Pedro Pascual Arzoz, 2011. "Fraude fiscal e IVA en España: incidencia en un modelo de equilibrio general," Hacienda Pública Española / Review of Public Economics, IEF, vol. 199(4), pages 9-52, December.
    18. Nguyen, Trang T.T. & Prior, Diego & Van Hemmen, Stefan, 2020. "Stochastic semi-nonparametric frontier approach for tax administration efficiency measure: Evidence from a cross-country study," Economic Analysis and Policy, Elsevier, vol. 66(C), pages 137-153.
    19. Sijbren Cnossen, 2017. "VAT and Agriculture: Lessons from Europe," CESifo Working Paper Series 6350, CESifo.
    20. Luca Barbone & Misha V. Belkindas & Leon Bettendorf & Richard Bird & Mikhail Bonch-Osmolovskiy & Michael Smart, 2013. "Study to quantify and analyse the VAT Gap in the EU-27 Member States," CASE Network Reports 0116, CASE-Center for Social and Economic Research.

    More about this item

    Keywords

    Valued Added Tax (VAT); Real Gross Domestic Product; VAT Base; Elasticity; Private Consumption Expenditure; Correlation.;
    All these keywords.

    JEL classification:

    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:trp:01jefa:jefa0044. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: David Simon Hall (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.