Taxation is the major source of revenue for the Ghanaian economy. The researcher seeks to assess its effectiveness on the economic development of the country. He also reviews the tax collection system in Ghana. The research shows that the percentage of tax revenue to Gross Domestic Product (GDP) in Ghana from 1990 to 2016 is 14.56 %. This is deemed inadequate to contribute immensely to the fortunes of the country. Majority of tax evaders are in the informal sector that forms 70% of the nation’s output. In spite of the huge size of the informal sector, they contribute only 16.7% of the tax revenue. The researcher also compares direct and indirect taxes in Ghana and their apparent effect on the socio-economic lives of the people. It is evident from the research that the country is over relying on indirect taxes to the detriment of the poor in the society, thereby defeating the canon of taxation about equality.

taxation, economic growth, gross domestic product, borrowing, public finance