Analysis of Value Added Tax Effect on Firms’ Cash Flow in Various Sectors of the Emerging Economies | Chapter 09 | Emerging Issues and Development in Economics and Trade Vol. 3
Inadequate cash flow constitutes the
major reason for most corporate failures worldwide. However, absence of
empirical evidence on value added tax (VAT) effect on corporate cash flow in
different industries means that cash flow implications are often ignored by VAT
policy makers. This study examines the relationship between VAT and firms’ cash
flow in various sectors of the economy within the context of an emerging
economy. The study employs factor analysis to determine if there is a
statistically significant difference in cash flow effect of VAT on firms among
the different industry groupings in Ghana. The study used data on firms
registered with the Large Tax Payer Office (LTO) of the Ghana Revenue Authority
(GRA) to conduct the analysis. It was established that VAT effect on firms’
cash flow differs significantly between industry groupings, depending on the
particular factor influencing the amount of VAT remittance to revenue agencies.
The findings also show that governments’ decisions on the efficiency and
neutrality of the VAT scheme must not only be influenced by its ability to transfer
the tax burden from corporate bodies to final consumers, but also its effect on
firms’ cash flow in various industries. The findings have important policy
implications for policy makers in evaluating the efficiency and neutrality of
different tax schemes.
Author(s) Details
Dr. Hussein Salia
Department of Accounting,
Faculty of Business Administration, Heritage Christian University College,
Amasaman – Accra, Ghana.
Dr. Williams Abayaawien
Atuilik
Department of Accounting,
Faculty of Business Administration, Heritage Christian University College,
Amasaman – Accra, Ghana.
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