TAX AS A STIMULUS FOR GROWTH AND DEVELOPMENT IN GHANA
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TAX AS A STIMULUS FOR GROWTH AND DEVELOPMENT IN GHANA
Chapter One: Introduction and Background to the Study.
The entire purpose of tax income is to create revenue to enhance the welfare of a nation’s people, with an emphasis on fostering economic growth and development by providing basic amenities for improved public services through efficient administrative systems and structures. Tax money is critical to promoting economic activity and development.
The government uses tax income to guarantee that resources are directed towards essential societal programmes while also providing assistance to the poor. If tax income is not properly administered, its impact on economic activity and growth may be negligible.
This necessitates a thorough assessment of the relationship between tax revenue and the economy in order to develop appropriate policies and strategies for its efficiency.
A critical challenge for tax administration in the twenty-first century Ghana is to push the boundaries of professionalism, accountability, and public awareness of the imperatives and benefits of tax revenue in our personal and business lives, such as promoting economic activity, facilitating savings and investment, and generating strategic competitive advantage.
If tax administration fails to meet the aforementioned problems, then there is an urgent need for reform in the domain of taxation and tax administration.
A country’s tax system has a significant impact on other macroeconomic indices, particularly in developed and developing countries; there is a link between tax structure and economic growth and development.
Indeed, it has been suggested that the amount of economic growth has a significant impact on a country’s tax base (Kiabel, 2009; Vincent, 2001), and tax policy objectives differ depending on the stage of development.
Similarly, the economic criteria used to evaluate a tax structure and the relative importance of each revenue source change over time (Vincent, 2001).
For example, during the colonial era and immediately following Ghana’s political independence in 1960, the main purpose of tax revenue was to increase revenue.
Later, the emphasis turned to the newborn industries’ protection and income redistribution goals. In his discussion of the relationship between tax structure and economic development, (Vincent, 2001) separated the time of economic development into two parts: the early period when an economy is relatively underdeveloped, and the later period when the economy has developed.
During the early period, there is little room for the application of direct taxes because the majority of the population lives in rural areas and works in subsistence agriculture. Because their revenues are difficult to determine, tax assessments at this level are based on assumptions with large margins of error.
Tax revenue is a potent weapon for economic transformation and plays an important role in every economy throughout the world. It is never stagnant, but rather dynamic, and should reflect the present economic conditions.
The tax system provides the government with an opportunity to collect additional revenue in addition to other forms of income that are required to meet its pressing commitments.
A solid tax system is also one of the most effective ways of mobilising a country’s internal resources, as well as establishing an enabling and supportive climate for economic growth and development (Ogbonna, 2010).
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