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Cited by 3Taxation and Compliance StudiesEconomic and Fiscal StudiesFiscal Policy and Economic Growth

Financial development as a catalyst for tax revenue generation in Ghana: exploring the channels

Open access
Kamasa, Kofi, Korsah, Ellen, Bonuedi, Isaac, Forson, Priscilla·2025·Scientific African
DOI 10.1016/j.sciaf.2025.e02715
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Abstract

This paper investigates the effect of financial sector development in driving tax revenue generation in Ghana, as well as the channels through which this may occur. The paper utilizes an annual time-series dataset over the period 1980 – 2021. The auto-regressive distributed lag (ARDL) cointegration technique is employed as the main estimation strategy, with the fully modified least squares (FMOLS) and canonical cointegrating regression (CCR) cointegration techniques serving as robustness checks. The findings reveal that financial development significantly enhances tax revenue generation in the long run, with indirect, corporate, and income taxes showing a higher sensitivity to financial sector development over the long run. Furthermore, the study identifies a reduction in the shadow economy , plausibly through the formalization of informal sector activities, as a critical pathway through which financial development contributes to improved tax revenue generation. Finally, it is found that effective control of corruption , better human capital development (education), and economic growth (higher GDP) constitute significant drivers of Ghana’s tax revenue in the long run. The study recommends the enforcement of stricter regulations to ensure tax compliance within financial institutions , fostering closer collaboration between tax authorities and financial institutions to facilitate the exchange of relevant information, and improving tax administration processes to ease taxpayer compliance.

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  • The fundamental difference between developed and least developed countries in terms of their ability to effectively harness both tax and non-tax revenue streams is deeply rooted in the sophistication and depth of their respective financial systems.

    “The fundamental difference between developed and least developed countries in terms of their ability to effectively harness both tax and non-tax revenue streams is deeply rooted in the sophistication and depth of their respective financial systems (Lompo 2024;Kamasa et al. 2025).”

    From Innovative development financing amidst uncertainty: how can African countries leverage domestic resource mobilization? (2025) · cites this paper as Kamasa et al. 2025

  • A sound financial sector encourages businesses and individuals to operate within the formal economy and fulfill their tax obligations.

    “the empirical findings of Nnyanzi et al. (2018), Lompo (2024), and Kamasa et al. (2025) demonstrate that a sound financial sector encourages businesses and individuals to operate within the formal economy and fulfill their tax obligations.”

    From Innovative development financing amidst uncertainty: how can African countries leverage domestic resource mobilization? (2025) · cites this paper as Kamasa et al. (2025)

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Authors
Kamasa, K., Korsah, E., Bonuedi, I., & Forson, P.
Affiliations
  • University of Mines and Technology (GH)
  • Kwame Nkrumah University of Science and Technology (GH)
Corresponding author
Kamasa, Kofi
ORCID
Venue
Scientific African
Publisher
Elsevier BV
Published
2025-06
Volume
28
Pages
e02715
ISSN
2468-2276 (ISSN-L)
DOI
10.1016/j.sciaf.2025.e02715
OpenAlex
W4409670331
Cited by
3
References
19
Citations by year
2026: 2 · 2025: 1
FWCI
2.77
Type
journal article
Language
en
Open access
Licence
Locations
  • Scientific African (publishedVersion, cc-by-nc-nd)
  • DOAJ (DOAJ: Directory of Open Access Journals) (submittedVersion, cc-by-sa)
Topics
  • Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Taxation and Compliance Studies
  • Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Economic and Fiscal Studies
  • Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Fiscal Policy and Economic Growth
Keywords
financial development, tax revenue, shadow economy, informal sector formalization, corruption control, human capital, economic growth, tax compliance, tax administration, Ghana

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