Household spending and income inequality: examining the effects o f a consumption-based tax in Ghana

Abstract

This paper examined the impact of VAT on household spending and income inequality in Ghana by incorporating Zivot–Andrews test. The  study employed bootstrap autoregressive distributed lag model, complemented by Toda–Yamamoto causality test. The empirical findings  revealed that the elasticity of consumer spending with respect to VAT is negative, inelastic, and significant in the long-run but  leaves no short-run effect. The impact of a change in VAT varies on household spending and income inequality.