Ruhr Economic Papers

Ruhr Economic Papers #389

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

by David Nguyen-Thanh and Christoph Strupat

RWI, RGS Econ, 12/2012, 28 S./p., 8 Euro, ISBN 978-3-86788-444-0 DOI: 10.4419/86788444



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.

JEL-Classification: H23, H25, H10

Keywords: Effective tax rates; tax holidays; Ghana