SERVICES SECTOR CONTRIBUTION TO TAX REVENUE GENERATION AND ECONOMIC GROWTH IN GHANA: A CASE OF THE TELECOMMUNICATION SUB-SECTOR

ABSTRACT

This study investigates the contribution of the Services sector to total tax revenue and economic growth in Ghana, with particular focus on the Telecommunication subsector. Quarterly time series data for the period 2008 to 2016 was used for the analysis within the Autoregressive Distributed Lagged (ARDL) framework. Additional qualitative information was elicited from key tax administrators to ascertain the challenges confronting tax mobilization in the telecom subsector to authenticate the empirical findings.

The findings revealed that there exist short run and long run relationship between the Information, Communication and Telecom tax revenue on total tax revenue and economic growth, suggesting that, revenue from the ICT tax positively influences economic growth in both periods, which implies, the services sector significantly contributes to economic growth in Ghana.. In addition, the ICT revenue in the short run positively affects total tax revenue and economic growth. But, the long run results indicates a negative effect on economic growth and exerts positive influence on total tax revenue. This may be due to government subsidization policy on cost of ICT infrastructure to make ICT services accessible to all.

The qualitative aspect of the study showed that some mobile telecoms operators do not honour their corporate tax obligations regularly. Also, given the complexity of the telecom operations, there is a base erosion and profit shifting that makes Telecom companies under estimate taxes

For policy purposes, the study suggests that the government should strengthen the tax administrators in Ghana with the needed training and logistics to effectively assess, audit and collect taxes from the ICT and Telecom sector to maximize revenue mobilization. Additionally, GRA should liaise with NCA to foster and sensitize not only the registered

telecom operators, but the informal ones. This will help widen the tax net and even with marginal tax rates more revenue will be realized for accelerated economic growth.