Chairperson of the Ghana Revenue Authority (GRA), Stephen Adei, has said contrary to popular assertions, Ghanaians are not being over-taxed by government given the low average effective tax rate charged most Ghanaians.
According to Professor Adei, all taxes charged Ghanaians when put together sum up to a maximum 15 percent effective tax rate charge on incomes of Ghanaians.
“Putting all taxes collected together, the average tax rate either for those in the urban centres and modern economy would be a maximum of 15 percent and that is not over-taxing. People think they are being over-taxed because there are so many taxes but in reality the effective tax rate is only 15 percent of income,” he averred.
Adding that persons in the higher income bracket however, have a higher effective tax rate of 30 percent.
“For higher income earners, the effective tax rate is 30 percent which is not also so much, but we make so much political noise about it when the effective tax rate is not that high,” he further noted.
Prof Adei made the above comments in response to assertions that Ghanaians are being over-taxed by government particularly with the introduction of new taxes in the 2021 Budget Statement amid an era where the Covid-19 pandemic has devastated businesses and livelihoods of Ghanaians.
Speaking further in the interview, Prof Adei welcomed the findings of the Afrobarometer survey which revealed that 72 percent of Ghanaians are willing to pay more taxes to finance development, noting it is the only way out for government to stop borrowing and mobilize more revenues for development.
“If you continue borrowing, you become worse off, so the only way out is Ghanaians paying their way out. But that cannot be by increasing the level of taxation all the time but spreading the tax net and making sure that we have effective tax systems. But the fact remains that every country must pay its way out of debts and development and that’s why I like the findings of the Afrobarometer report,” he posited.
Further asserting that, government at the commencement and completion of every fiscal year has zero monies to its credit.
This, he noted is due to the fact that all expenses made by government in a fiscal year is supported by borrowings made since mobilized revenue is insufficient cater for government’s expenditure in any given fiscal year.
“Our debt keeps ballooning because people think government has some money somewhere, but actually at the beginning and end of the year government has zero monies, Every money to spent within the year comes from taxes or borrowings,” he stated.
The effective tax rate is the percent of their income that an individual or a corporation pays in taxes. It is the rate for individuals is the average rate at which their earned income, such as wages, and unearned income, such as stock dividends, are taxed
