Moderating Effect of Governance on the Nexus of Tax Policy and Economic Welfare in Sub-Saharan Africa
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Abstract
Sub-Saharan Africa (SSA) has demonstrated slow progress in enhancing sustainable economic welfare, evidenced by growing economic inequalities and disparities. This raises concerns regarding the efficacy of existing economic strategies and governance frameworks. Furthermore, there is a paucity of literature on the role of governance in understanding the nexus between tax policy and economic welfare. The study utilized data available from 1996 to 2022 for 36 SSA countries obtained from World Development Indicators (2022) and World Governance Indicators (2022). The data were analyzed using the System-Generalized Method of Moments (GMM). The study concluded that for the well-being of individuals and communities to be enhanced in SSA, tax policy must be optimized in a way that maximizes benefits or minimizes liabilities within the legal framework. Therefore, we recommend that by addressing governance challenges and promoting good governance practices, policymakers can create an enabling environment for the effective design and implementation of tax policies that contribute to sustainable economic development and welfare.
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