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This study empirically examines the effects of external debt servicing on capital formation in Ghana. Using data from 1980 to 2019, the study estimates the Autoregressive Distributed Lag (ARDL) model and finds that the effect of external debt servicing is negative both in the long and the short run due to the tax disincentive effect. This suggests that as a result of the potentially high debt servicing due to the high debt stock, any future investment may attract high marginal tax rates and would tend to reduce investment in the economy. The result further shows that external debt servicing affects private capital formation more than public capital formation. However, the effect of the external debt stock on private investment is negative in the long run but positive in the short run confirming the direct effect of the debt hypothesis' existence in Ghana suggesting that external debt discourages a long-term investment which is critical for economic growth. Additionally, there exists complementarity between public and private investments indicating that some public investments attract private ones into the country. Therefore, external debt service payment crowds out private investment through excessive interest charges, so government should determine a threshold of borrowing in order to minimize the high debt servicing. JEL: E22, E31, E62, F31, G31, H63, P24 Article visualizations:

PurposeThe purpose of this paper is to comprehensively examine Ghana's tax reform programme and investigate whether it has facilitated the revenue mobilization capacity of the overall tax system and of individual taxes on the basis of estimates of tax buoyancies and elasticities.Design/methodology/approachThis study uses the proportional adjustment approach to estimate tax buoyancies and elasticities of the overall tax system and of individual taxes for the pre and post tax reform period over the 1970-2013 period.FindingsThe results show that in general, tax reforms had a positive influence on the overall tax structure and on the individual tax handles as evidenced in the more than unity buoyancy and elasticity. All the individual taxes, except excise duties, recorded buoyancies and elasticities of more than unity during the reform period.Practical implicationsTax authorities ought to move away from income-based taxation which discriminates against saving and investment, in favour of consumption-based taxes in conformity with international standards. Emphasis must also be placed on those taxes that have high revenue elasticities. These taxes include the personal, corporate, the Value Added Tax, and the import duties.Originality/valueIn this study, the paper extends and disaggregates the data on taxes, account for discretionary tax changes from the historical time series data, and use the adjusted historical time series data to estimate tax elasticity. The study therefore provides an in-depth understanding of the effects of the tax reforms on the overall tax system and of individual taxes in Ghana.