Ghana’s Tax Compliance Challenge: Only 1.9 Million of 7.4 Million Registered Taxpayers Contribute To Tax Revenue
Ghana is grappling with a significant tax compliance issue, as revealed by Deputy Minister of Finance, Dr. Alex Ampaabeng, at the World Bank’s launch of the 8th Ghana Economic Update.
Out of approximately 7.4 million registered taxpayers, a mere 1.9 million contribute to the national coffers. This stark disparity underscores a critical need for reform within the country’s tax system.
Dr. Ampaabeng disclosed that both the Ministry of Finance and the Ghana Revenue Authority (GRA) are currently engaged in a comprehensive cleanup of the tax database, a move aimed at boosting tax revenue.
He assured that the government is committed to enhancing the fiscal environment through various initiatives, including a significant reduction in human interaction in tax collection processes in favor of digital solutions.
“Going forward, reducing the human interface is key to growing our [Ghana’s] tax revenue. The Ministry of Finance is working with the GRA to reduce numerous tax infractions,” Dr. Ampaabeng stated.
Ghana’s tax collection efforts have lagged behind those of its peers in the Sub-Saharan African region. Between 2017 and 2021, the country’s average tax collection was just 13.2% of its Gross Domestic Product (GDP).
This figure is considerably lower than the Sub-Saharan Africa average and falls 8 percentage points short of Ghana’s estimated tax capacity of 21.2% of GDP.
The World Bank report accompanying the Ghana Economic Update identified several inefficiencies within Ghana’s tax policy framework and compliance mechanisms.
Among its recommendations, the report emphasized the need to rationalize large tax expenditures that have significantly contributed to the decline in tax revenues. Striking a balance between reducing revenue losses and mitigating potential distributional and social impacts will be essential.
Addressing these inefficiencies, the World Bank suggests, could play a pivotal role in ensuring macroeconomic stability and generating the resources necessary for sustainable long-term growth and poverty reduction efforts.
The Government’s focus on digital transformation and database cleaning is a critical step towards reversing the current trend of low tax compliance.
By leveraging technology to reduce human interaction in tax collection, Ghana aims to enhance efficiency, reduce infractions, and ultimately, improve its tax revenue, laying the groundwork for a more robust and equitable economic future.
