The Sensitivity of Yield of Petroleum Tax in Ghana

Purpose: This study estimated the buoyancy and elasticity of both the total tax system and its components (including petroleum tax), and evaluated the effects of tax reform on government revenue mobilization capacity. Design/Methodology/Approach: The proportional adjustment approach (PAA) concept was used to control the historical time series tax data (HTSTD) gathered from the ministry of finance and economic planning (MOFEP) to facilitate the estimation of tax elasticity and tax buoyancy, using the ordinary least squares (OLS) method. The Ghana statistical service (GSS) was sourced for data on Ghana’s gross domestic product (GDP). Findings: The study found petroleum tax to be both buoyant and elastic during the period. However, the elasticity and buoyancy of the total tax revenue were both found to be less than unity. Implications/Research Limitation: It is projected that the findings of this study would meaningfully contribute to literature on the general effects of taxes, especially the effects of petroleum tax on total tax revenue. However, the study had limitations since the accuracy of the secondary data used could not be independently verified. Practical Implication: The results of the study could provide guidance for policy makers on the orchestration of a suitable matrix of taxation that would prevent deadweight losses in the economy, and bourgeon tax revenue in Ghana to ease the achievement of the seventh sustainable development goal (SDG 7). Originality/Value: This study would provide an in-depth understanding of the effects of tax reforms on both the overall tax system and the individual taxes, including petroleum tax as a key independent variable under investigation for the first time in Ghana.