Asymmetric effect of tax systems on poverty and inequality: Exploring the distributional impact of domestic resource mobilization systems in Ghana
Date
2023
Journal Title
Journal ISSN
Volume Title
Publisher
Cogent Economics & Finance
Abstract
Abstract: Earlier studies have assumed the effect of tax systems on poverty and
inequality to be symmetric by imposing linear specifications. In this study, we
account for possible asymmetries by re-examining the effect of tax systems on
poverty and inequality in Ghana. We rely on the Nonlinear Autoregressive
Distributed Lag (NARDL) estimation technique and time-series data from 1983 to
2016. The findings revealed that, while the nexus between tax systems and poverty
is asymmetric, the reverse holds for the relationship between tax systems and
inequality. Specifically, we establish that, while positive (negative) shocks in direct
taxes raise (reduce) the level of poverty, the shocks in indirect and overall tax
systems produce negative results. Moreover, the symmetric evidence is observed
only for indirect taxes and inequality in the long-run, and the relationship is positive.
We recommend for a poverty reduction strategy that is centered on tax reduction at
all levels. Equally important is a policy that has a firm foundation in the indirect tax
system to bridge the inequality in Ghana.
Description
Research Article
Keywords
poverty, inequality, tax system;, asymmetric, symmetric, Ghana
Citation
To cite this article: Frank Adu, Imhotep Paul Alagidede, Dennis Boahene Osei & Michael Effah Asamoah (2023) Asymmetric effect of tax systems on poverty and inequality: Exploring the distributional impact of domestic resource mobilization systems in Ghana, Cogent Economics & Finance, 11:1, 2166211, DOI: 10.1080/23322039.2023.2166211