The Effects of Corporate Taxes on the level of Investment in Ghana

Abstract

This study sought to find out whether corporate taxes are high in Ghana to influence the level of investment both in the shot-run and long-run. Annual data from 1970-2010 were used to estimate the model. Based on the features of time series data, an error-correction model was formulated to estimate the determinants of investment in Ghana. The results show that corporate tax influences investment behaviour in the long-run, albeit no significant short-run impact. The study recommends that, long-run measures that seek to stimulate investment in Ghana would have to be accompanied by measures aimed at reducing corporate taxes in Ghana to the degree that will trigger more private investments in Ghana.

Key words: Corporate Tax, Johansen Technique, Investment, Vector Error Correction Model,