AN ASSESSMENT OF TAX POLICIES ON ECONOMIC GROWTH IN AFRICA

Abstract

In Africa, several tax policies have been implemented over the years with the aim of boosting economic growth but the rate of economic growth in these countries have not been convincing. It is also important to stress that poverty remains prevalent, predominantly in the Central, Western, Eastern and Southern parts of Africa. In light of this, the primary aim of the study was to assess the effect of tax policies on economic growth in thirty-one Africa countries for the period commencing 2000 to 2019, utilising the polynomial regression model, due to the unique nature of model and infrequent application. The empirical results revealed that there is a negative relationship between tax policies (income tax and value added tax) and economic growth but imposition of excise tax can have impact on economic growth positively especially when the demand for the affected commodities are inelastic. As a result of these findings, it is recommended that, policy makers develop favourable tax policies that will ensure increasing disposable income of households leading to an enhancement in economic growth in the long term. Also, the government of the affected economies should formulate policies that will increase their expenditure but reduce inflationary pressure. The aspect of inflation could be achieved with the adoption of a modest inflation targeting regime under the supervision of the central bank. The implication of these findings is that the economy of the African continent is likely to perform better if more favourable tax policies are implemented by the tax authorities.