By To enhance economic growth and bolster revenue generation, the Ghanaian government is rolling out initiatives aimed at improving the country’s tax-to-gross domestic product (GDP) ratio.
Abena Osei Asare, the Minister of State at the Finance Ministry, has underscored the need to broaden the tax base while intensifying efforts to boost tax mobilization in the formal sector.
Currently, Ghana’s tax collection lags behind that of other lower-middle-income countries, largely due to widespread non-compliance with tax obligations. This phenomenon has contributed to a widening fiscal deficit and a mounting debt burden for the government. Ghana’s tax-to-GDP ratio, standing at less than 14%, falls well below the average for 30 African countries (16.5%) and is notably lower than that of comparable lower-middle-income nations.
In a panel discussion at the ongoing IMF/World Bank Spring Meetings in Washington D.C., Mrs. Asare shed light on the obstacles hindering Ghana’s revenue mobilization endeavors, citing a narrow tax base stemming from the prevalence of the informal economy and a pervasive culture of non-compliance.
She revealed that prior to 2017, only about 1.2 million individuals were contributing to direct taxes, despite approximately 6 million people being eligible. This stark disparity underscores the imperative of broadening the tax base.
To address these challenges, the government is prioritizing initiatives such as digitizing revenue channels, minimizing human involvement in tax administration, and fostering a culture of tax compliance.
“One of the challenges that we see in Ghana is the narrow tax base, most of the economy is not formalized. When I say that I mean that most of the people are in the informal sector so we are not able to capture and bring them to the tax when it comes to payment of direct taxes. Before 2017, we had just about 1.2 million paying direct taxes, when the number of people eligible to pay taxes was around 6 million.
“So clearly, you could tell that the tax base was narrow, and so we need to do something to address this. Our tax revenue administration, there’s a lot that we need to do to prop up in terms of reducing human interventions and digitising most of our revenue lines to make sure that we can rake in more revenue and also there’s a culture of non-compliance.”
Additionally, she added that efforts are being made to ensure public financing is utilized in the best way possible to support citizens.
“One thing the government is doing is to make that public financing is utilized in the best way to help or support citizens.”
