Relative Impact of Various Taxes on Poverty in Ghana

Abstract

Poverty and inequality are tortuous manifestation based on a grid of interconnecting social, demographic, economic and political elements which are source of worry to society. Understanding their nature and effect is essential in functioning policies to address them. Taxation which is one of the sources governments mobilize revenue to address issues affecting the poor and society also have effect on poverty and inequality. This study investigates the effect of Ghana’s tax policies on poverty. The study employed the Johansen cointegration estimation techniques using annual time series data from the period 1984 to 2013. The results show that increase in indirect tax policies worsen poverty level in Ghana. However, direct tax policies and remittances have mitigating effect on poverty. Considering the agrarian structure of the economy, reducing export taxes will promote activities in the export subsector.