Tax burden, perceived fairness, and compliance in Ghana's tax system

Jörgen Levin and Emmanuel Orkoh

No wp-2025-91, WIDER Working Paper Series from World Institute for Development Economic Research (UNU-WIDER)

Abstract: Determining the optimal tax burden that maximizes compliance and revenue remains a major challenge in developing countries, partly due to the literature's focus on linear tax-compliance relationships. Using firm-level data from Ghana and an instrumental variable approach, this paper finds a nonlinear relationship: compliance rises with higher taxes up to a threshold of 45%, beyond which it declines. This threshold, more than double the average tax burden of 21%, varies by firm size and formality—medium-large firms (30%), micro (46%), small (49%), formal (41%), and semi-formal (46%).

Keywords: Taxation; Tax compliance; Tax evasion; Ghana (search for similar items in EconPapers)
Date: 2025
New Economics Papers: this item is included in nep-acc, nep-afr, nep-iue and nep-pub
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