Taxable capacity and effort of Ghana's value-added tax

Value-added tax (VAT) has not only brought dynamism in Ghana’s revenue mobilisation landscape but also occupies a centre stage in the country’s fiscal consolidation efforts. Interestingly, the VAT regime has undergone a number of discretionary reforms in a bid to generate as much revenue as possible for its fiscal mandate. However, the trends show that VAT’s contribution to total tax revenue has consistently remained below 30 percent over the past one and a half decades. Could it be that the scope for further VAT revenue expansion is reaching its limit? This study uses the regression approach to estimate and examine the taxable capacity and collection efforts of Ghana’s VAT. The paper discovers that the VAT regime is characterised by both periods of underexploited and overexploited taxable capacities. However, on the whole, there appears to be little scope for further revenue expansion, given the existing base. The study, therefore, argues that the recent over concentration on VAT may endanger the country’s quest for fiscal adequacy. Consequently, an appropriate tax mix is highly recommended.JEL classification: H20; H25; E62; 017.Keywords: Tax effort; Tax capacity; VAT; Tax collection; Shadow econom

Exchange Rate Volatility and Foreign Direct Investment in Sub-Saharan Africa

Foreign Direct Investment (FDI) is an important source of financing development. It enhances efficiency and raises skills of local manpower, facilitates transfer of technology, generates employment and promotes productivity resulting in broad welfare improvements. Although FDI could have a substantial impact on the growth of African economies, poverty reduction and the achievement of various dimensions of human development as articulated in the Millennium Development Goals, its flows to Africa, though growing steadily have been relatively low, volatile, and highly concentrated in a few countries. One of the factors that have been identified in the literature as key drivers of FDI is exchange rate volatility; yet, the evidence on the impact of exchange rate volatility on FDI has been mixed and few of such studies focus on Africa. Using a dynamic linear panel model applied to data from 27 African countries, this study examines exchange rate volatility on FDI flows to Africa. The study finds a robust negative and significant impact of exchange rate volatility on FDI in African countries. Greater stability in the exchange rate system may be desirable in order to promote higher volumes of foreign direct investment inflows in African countries

Firm Capacity Utilization in Ghana: Does Foreign Ownership Matter?

One major policy change that has driven enterprise development in Ghana over the past two decades has been the opening of the sector to private and foreign participation. Using firm-level cross-sectional data for on Ghanaian enterprises for the year 2006 within an endogenous switching regression model, we analyze the question whether enterprises with high foreign ownership concentration exhibit different levels of capacity utilization from domestically owned firms. It was found that firms that choose to engage foreign partners have higher capacity utilization than a random firm from the sample would have and those who engage more domestic partners do no better or worse than a random firm from the sample. Other findings suggest that the level of demand, capital-labour ratio, wage productivity, and labour productivity are significant determinants of capacity utilisation. Increasing openness to foreign participation and allowing firms more flexibility to make factor choices by reducing strict labor regulations can positively affect capacity utilization. Keywords: capacity utilization, firm ownership, endogenous switching regressio

Is value-added tax a moneymaking-machine for developing economies? Evidence from Ghana

Value-added tax (VAT) became a tax of choice recommended by the Breton Wood Institutions to boost tax revenue shares in developing countries. However, after several decades of VAT implementation globally, empirical evidence on its revenue effects is still inconclusive. The key question in this paper is: has the adoption of value-added tax (VAT) really made Ghana’s tax revenue mobilisation better off? This paper employs both the Fully Modified OLS and Autoregressive Distributed Lag (ARDL) approaches to test the moneymaking hypothesis for Ghana’s VAT. On the whole, the study fails to uphold the view that the VAT is a money-machine for Ghana. This implies that its adoption has not really brought about any dramatic improvement in aggregate tax shares. The study therefore recommends a reduction in the over concentration on VAT. An appropriate balance of tax-mix is therefore recommended.JEL classification: H25, E62, O23Keywords: value-added tax, fiscal policy, government revenue, development polic

Effect of insecticide-treated bed net usage on under-five mortality in northern Ghana

Background: Although under-five mortality rate seems to be declining in Ghana, the northern part of the country has higher levels of under-five mortality vis-à-vis the national rates. This research examines the correlates of the high under-five mortality among children in the northern part of Ghana, with emphasis on the usage of insecticide-treated bed net (ITN), as recommended by the World Health Organization. Methods: A total of 3,839 under-five children sourced from the Ghana Demographic and Health Survey - was used for this study. Univariate descriptive statistics was employed to describe the variables used for the empirical estimation. The maximum likelihood estimation technique was used to estimate a logit model in other to determine the effect of insecticide treated bed net usage on under-five mortality. Results: Insecticide-treated bed net usage among children enhances their survival rates. Thus, under-five mortality among children who sleep under treated bed nets is about 18.8% lower than among children who do not sleep under treated bed nets. While health facility delivery was found to reduce to reduce under-five mortality, child bearing among older women is detrimental to the survival of the child. Conclusions: The study, therefore, recommends that policies targeting reduction in under-five mortality in northern Ghana should consider not mere availability of ITNs in the household, but advocate the usage of these treated nets. The study recommends to the Ministry of Health to extend their services to unreached rural communities to encourage health facility delivery to reduce under-five mortality.</p

Is Value-added Tax a Moneymaking-Machine for Developing Economies? Evidence from Ghana

Value-added tax (VAT) became a tax of choice recommended by the Breton Wood Institutions to boost tax revenue shares in developing countries. However, after several decades of VAT implementation globally, empirical evidence on its revenue effects is still inconclusive. The key question in this paper is: has the adoption of value-added tax (VAT) really made Ghana’s tax revenue mobilisation better off? This paper employs both the Fully Modified OLS and Autoregressive Distributed Lag (ARDL) approaches to test the moneymaking hypothesis for Ghana’s VAT. On the whole, the study fails to uphold the view that the VAT is a money-machine for Ghana. This implies that its adoption has not really brought about any dramatic improvement in aggregate tax shares. The study therefore recommends a reduction in the over concentration on VAT. An appropriate balance of tax-mix is therefore recommended

Policy Stringency, Handwashing and COVID-19 cases: Evidence from Global dataset

Objective: : Since the COVID-19 pandemic, many governments globally have introduced policy measures to contain the spread of the virus. Popular COVID-19 containment measures include lockdowns of various forms (aggregated into government response stringency index [GRSI]) and handwashing (HWF). The effectiveness of these policy measures remains unclear in the academic literature. This study, therefore, examines the effect of government policy stringency and handwashing on total daily reported COVID-19 cases. Method: : We use a comprehensive dataset of 176 countries to investigate the effect of government policy stringency and handwashing on daily reported COVID-19 cases. In this study, we apply the Lewbel (2012) two-stage least squares technique to control endogeneity. Results: : Our results indicated that GRSI significantly contributes to the increase in the total and new confirmed cases of COVI-19. Sensitivity analyses revealed that the 1st, 4th, and 5th quintiles of GRIS significantly reduce total confirmed cases of COVID-19. Also, the result indicated that while the 1st quintile of GRIS contributes significantly to reducing the new confirmed cases of COVID-19, the 3rd, 4th, and 5th quintiles of GRSI contribute significantly to increasing the new confirmed cases of COVID-19. The results indicated that HWF reduces total and new confirmed cases of COVID-19; however, such effect is not robust to income and regional effects. Nonlinear analysis revealed that while GRSI has an inverted U-shaped relationship with total and new confirmed cases of COVID-19, HWF has a U-shaped relationship. Conclusion: : We suggest that policymakers should focus on raising awareness and full engagement of all members of society in implementing public health policies rather than using stringent lockdown measures