Public Sector Economics

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COMPLIANCE BURDEN AND TAX GAP AMONG MICRO AND SMALL SIZE BUSINESSES IN GHANA
(UNIVERSITY OF CAPE COAST, 2021-03-02) AVORKPO, ERIC ATSU
Developing an efficient and effective tax policy is not a guarantee for reducing revenue loss but a concerted effort of the taxpayers and the revenue mobilization agency to ensure high level of compliance without having to increase the cost of collecting these revenues and without imposing much compliance burden on the taxpayer. This study investigates the compliance burden and tax gap of Micro and Small Enterprises (MSEs) in Ghana. It specifically focuses on how compliance burden affects the tax gap (Revenue loss) as well as the correlates of compliance burden. Data on 485 registered MSEs taxpayers collected by the Directorate of Research Innovation and Consultancy (DRIC) was used for the study. A t-test was conducted whiles OLS was employed to examine the effect of compliance burden on the tax gap as well as the correlates of compliance burden. It was found that small enterprises underpay tax while micro enterprises overpay tax. The compliance burden significantly increases the tax gap. Tax audit, number of taxes, tax knowledge, distance to the tax office, and the kind of service used in preparing and filing returns were found to have significant effects on compliance burden in Ghana. The key policy recommendation is that Ghana Revenue Authority (GRA) should intensify its tax auditing work to reduce the compliance burden and build more offices to reduce the distance covered by MSEs when visiting the tax office to make tax payment or seek advice.
DETERMINANTS OF TAX REVENUE MOBILISATION IN LESOTHO
(UNIVERSITY OF BOSTWANA, 2020-12-11) Jabari, Refiloe
The study's objective is to examine the determinants of total tax revenue, VAT and IPCG taxes. Another aim is to investigate the effects of the Lesotho Revenue Authority (LRA) on these tax revenue categories. The empirical results are estimated using the autoregressive distributed lag (ARDL) estimation technique using the data for the period 1982 to 2017. The results show that the establishment of the Lesotho Revenue Authority has a significant positive effect on tax revenue and its categories, that the total tax is positively affected by per capita GDP, agricultural and services sectors, and remittance inflows. In contrast, official development assistance (ODA) negatively determines tax revenue. When analyzing the determinants of direct taxes represented by IPCG taxes, it is found that only per capita GDP has a positive effect in the long run. Remittances and ODA have a negative long-run effect. In the short run, LRA and GDP per capita have a significant positive effect on IPCG tax revenue. The VAT model findings show that services hinder the VAT revenue while agriculture and ODA boost it in the long run. The short-run dynamics reveal that VAT revenue is affected positively by the share of agricultural value-added and negatively affected by the share of services value-added and remittances. Policies improving agricultural sector and enhancing economic growth are recommended because these variables have the potential to broaden the tax base in Lesotho
DYNAMIC PANEL DATA ANALYSIS OF THE IMPACT OF PUBLIC SECTOR INVESTMENT ON PRIVATE SECTOR INVESTMENT GROWTH IN SUB-SAHARAN AFRICA
(University Of Bostwana, 2018-11-12) BOIKANYO, PHEMELO
The present sought to analyze the impact of public sector investment on private sector investment in Sub-Saharan Africa. The study utilized panel data from 2005-2015 across forty-five SubSaharan African economies. To estimate the results, the study employed the Two-Step System GMM model as developed by (Arelano & Bover, 1995). In the presence of endogeneity, GMM is one of the robust estimation techniques that produces unbiased, efficient, and consistent estimators. For the validity of the instruments and presence of second-order serial correlation, the study used the Difference-in-Hansen and the Arrellano-Bond specification tests, respectively. The results from the study reflect that public sector investment negatively and significantly impacts private sector investment in Sub-Saharan Africa. Therefore, public sector investment crowds-out private sector investment. To account for the heterogeneous nature of countries in the region, the study conducted a sub-sample analysis by dividing the sample into low-income countries and lowerincome and upper-middle income economies. Results from the sub-sample analysis showed that public sector investment bore no significant effect on private sector investment in low-income countries sample. As regards lower-income and upper-middle income economies, public sector investment crowds-out private sector investment. To minimize the crowding-out effects of public sector investment on private sector investment, the study recommends four policy interventions: proliferation and mobilization of domestic resources; inclusive models of public sector investment; strengthening of public sector financial managements systems, and regional integration of public infrastructure development.
THE EFFECT OF FOREIGN DEBT SERVICE ON PUBLIC INVESTMENT IN MALAWI
(UNIVERSITY OF MALAWI, 2020-09-23) BOTHA, ROSEMARY
Foreign debt has been one of the major ways through which Malawi has financed various development projects and fiscal deficits. Despite debt relief in 2006 through the HIPC and MDRI schemes, statistics show that the foreign debt stock has been on the increase, standing at 33% of GDP as of 2017 from 15% of GDP right after debt relief. High levels of debt stock subsequently imply high levels of debt service spread across the years to come. Various authors have argued that foreign debt service may have negative implications on an economy; however, their arguments were based on middle and high-income countries whose debt was not concessional. This study investigated if foreign debt service influenced the level of public investment in Malawi, a low-income country. The study used annual data from 1976 to 2015 and an ARDL model to estimate the relationship between public investment and foreign debt service along with other covariates. The results show that a statistically significant negative long-run relationship exists between foreign debt service and public investment in Malawi. This implies that, despite a large proportion of Malawi’s debt being concessional, its debt service crowds out initiatives to improve the country’s productive capacity through public investment.
GOVERNMENT CAPITAL EXPENDITURE, RECURRENT EXPENDITURE AND ECONOMIC GROWTH IN GHANA
(University of Cape Coast, 2017-06-10) ASOMANI, ABEL NYARKO
This study sought to find out the relationship between government expenditure and economic growth in a further disaggregated level in Ghana. Focusing on the period 1990 to 2015, it considered the major sub-components of recurrent expenditure (thus non-interest and interest-payment) and capital expenditure and their relationship with economic growth. Using a quarterlized time series data, this work employed the Autoregressive Distributed Lag model (ARDL) to estimate the relationship among these variables of interest. Furthermore, to establish the direction of causality that lies between these government expenditures and economic growth, this study resorted to the Granger Causality test to arrive at the direction of causality among the variables. Based on the ARDL results, capital expenditure and non-interest recurrent expenditure promotes economic growth in the long-run period while interestpayments retards economic growth in the all periods. The short-run results show that capital expenditure and non-interest recurrent expenditure increases economic growth while the lagged values for capital expenditure decreases economic growth. The granger causality test indicates a unidirectional causality running from the government expenditures to economic growth, except for that of interest payment whereby causality runs from Economic growth to interest-payment expenditure. Based on the findings, these recommendations were suggested to the Ministry of Finance: increase funding for capital expenditure, increase and intensify the monitoring aspect of non-interest expenditure and capping of the levels of public borrowings within a year to decrease interest-payment burden.
PUBLIC DEBT SUSTAINABILITY: ESTIMATING THE FISCAL REACTION FUNCTION FOR UGANDA (1981/82 – 2016/17)
(Makerere University, 2019-11-12) BULIME, NSUBUGA ENOCK WILL
This study examines the sustainability of Uganda’s public debt from 1981/82 to 2016/17. The study uses the fiscal reaction function approach to find out whether the government’s reaction to the growing debt is responsive and systematic. The study uses annual secondary time series data obtained from the Ministry of Finance, Planning and Economic Development, the Bank of Uganda and the World Bank Database for World Development Indicators of 2018. The autoregressive distributed lag estimation approach is used based on the order of integration of the study variables and the presence of a long run relationship. The results show that, in the long run, the government has been able to respond to past debt build-up in a sustainable way by increasing the primary balance. However, in the short run, the government has not been responsive to the debt bulge which poses risks to debt sustainability. The study suggests that in order to guarantee future debt sustainability, the government should strengthen the primary balance by reducing wasteful expenditures through eliminating corruption, reducing fiscal slippages and supplementary budgets and curbing the creation of more administrative units which increase the funding burden of the government.
REGIONAL INTEGRATION AND TAX REVENUE: A Case Study of the East African Community (EAC)
(MAKERERE UNIVERSITY, 2014-12-01) Babyenda, Peter
The implementation of EAC treaty required the formation of Custom Union as the first step of EAC regional integration process and charging a common tariff on goods from non-member states (EAC, 2012). This may have an impact on the tax revenues of the partner states as it may affect their custom revenues either positively or negatively thus this study empirically examines the relationship between the East African Community regional integration and tax revenue in the EAC partner states alongside identifying other determinants of tax revenue in EAC. The study uses secondary time series data from 1990 to 2011 obtained over the cross section of five EAC partner countries. The data were mainly obtained from World Bank Development indicators (WDI) and supplemented with data from African Economic Outlook, and the East African Community Facts and Figures - 2012. The study extends the tax model developed by Heller (1975) and also used by Leuthold (1991); Caballe & Panades (1997); Ghura (1998); Chen (2003) among others where the public decision maker’s utility function is maximized subject to a budget constraint in order to establish the impact of EAC regional integration on partner states’ tax revenue. Analytically, panel data techniques of fixed effects, random effects and the first difference GMM are used for the empirical analysis and using the Hausman’s specification test, FE model is the preferable model. The findings of the study show that the EAC regional integration has a negative impact on the tax revenues of the EAC partner states. GDP per capita, economic growth (GDP growth rate), public debt, population density and lagged tax revenue are identified as the other determinants of tax revenue in the EAC region. Basing on these findings, the study recommends that the EAC partner states should identify tax bases that cannot be affected by the EAC regional integration since the study found out that the EAC regional integration negatively affects the EAC partner states tax revenues and yet all the EAC partner states depend on tax revenues as their major source of domestic revenues.

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