Government has announced plans to implement measures to improve the country’s tax-to-GDP ratio.
Abena Osei Asare, the Minister of State at the Finance Ministry, has highlighted the challenges facing Ghana’s revenue mobilization efforts, including a narrow tax base due to the large informal economy and a culture of non-compliance.
“One of the challenges that we see in Ghana is the narrow tax base, most of the economy is not formalized,” Abena Asare stated during a panel discussion at the ongoing IMF/World Bank Spring Meetings in Washington D.C. She revealed that before 2017, only about 1.2 million people were paying direct taxes, while approximately 6 million people were eligible.
To address this issue, the government is focusing on digitizing revenue lines, reducing human interventions in tax revenue administration, and promoting a culture of compliance.
Mrs. Asare emphasized the need to bring more people from the informal sector into the tax net, as Ghana’s tax-to-GDP ratio of less than 14% is significantly lower than the average for 30 African countries (16.5%) and much lower than some comparable lower-middle-income countries.
Additionally, the government is working to ensure that public financing is utilized in the best way possible to support citizens, as the country’s widening fiscal deficit and rising debt burden have become a growing concern.
“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,” Mrs. Asare said.
