Economist and Professor of Finance, Godfred Bokpin, has said Ghana has the potential to raise tax revenues as high as 25 percent of Gross Domestic Product (GDP).
According to him, this is due to the country’s theoretical tax frontier or tax potential across the various tax handles which is estimated to be between 24 and 25 percent of GDP – approximately Ghs 104 billion.
“Ghana’s theoretical tax frontier or tax potential across the various tax handles is estimated to be between 24-25% approximately Ghs 104 billion instead of the current Ghs 54 billion or 14.3 percent of GDP,” stated Prof. Bokpin.
Speaking at the IMANI-GIZ Dialogue Series themed Business Taxation and the Road to Ghana’s Post-COVID Economic Recovery, Professor Bokpin opined that Ghana’s peers on the continent with similar informality and economic structure are raising tax revenues between 15 – 20 percent of GDP and as such Ghana needs to increase its efforts and close the tax revenue gap between it and other middle income African countries.
Last year, Ghana’s tax revenue as a percentage of GDP according to the 2021 Budegt Statement, amounted to 14.3 percent of GDP, translating into some Ghs 54 billion.
Government in its 2021 Budget Statement noted that it is targeting to raise total tax revenue of 16.7 percent of GDP (Ghs 72.8 billion) for this year.
According to Prof. Bokpin, one way government can increase its tax revenues to the desired level of 24 – 25 percent of GDP is through the rationalisation of the country’s current tax exemption regime.
According to him, the rationalisation of Ghana’s tax exemption regime will help review harmful tax practices of businesses, particularly multinational corporations and also adopt a comprehensive package of taxing wealth from property, capital gains among others.
Adding the rationalisation of tax exemptions will help raise more revenue for government.
Data available shows that between 2010 and 2018, the total amount of tax exemptions granted by the Ghanaian Government was in excess of Ghs 4.6 billion.
High tax exemptions have been identified as one of the major contributing factors to Ghana’s poor domestic revenue mobilization efforts.
The IMANI-GIZ Reform Dialogue Series focused on how to lessen the total burden of business taxation across multiple sectors, rationalise the tax exemptions regime, and use digitalisation and other initiatives to improve tax compliance.
The dialogue also sought to discuss how Ghana’s theoretical tax frontier can be used as a proper benchmark for evaluating the performance of Ghana’s revenue collection agencies going forward.
