Widening tax net sure way to shore up Ghana’s revenue – Economist

Lecturer at the Economic Department of the University of Ghana, Dr. Adu Owusu Sarkodie, says widening of the tax net is a sure way to shore up the country’s revenue base.

According to him, for Ghana to be self-sufficient, it has to broaden its tax base by extending the net from the formal to the informal sector to support ongoing projects.

Dr. Adu Sarkodie gave this advice during an exclusive interview with GhanaWeb business.

He explains that although Ghana is facing challenges when it came to tax collection in the informal sector, a change could be achieved through public education to enhance understanding of the need for citizenry to pay their taxes.

Statistics indicate that only 1.2 million out of 6 million economically active people in Ghana pay taxes.

One million out of the estimated 1.2 million people are in the formal sector and this development the economist said is negatively affecting revenue mobilization, must not continue.

Dr. Adu Owusu Sarkodie, who admitted that there are leakages in tax generation of the country, recommended that the GRA deploy robust digital services to plug loopholes in the tax systems of the country.

Over the years, Ghana’s budgets have suffered perennial deficits partially on account of low domestic tax revenue mobilisation which statistically hover around 18% of Gross Domestic Product (Danquah & Osei-Assibey, 2016).

Whilst this downside has several facets, one of the foremost remedies is protecting the domestic tax base.

The IMF & Ghana re-introducing scrapped taxes

The International Monetary Fund (IMF) has stated that the government must reinstate some abolished taxes and expand some existing ones in other to meet its short-term revenue projections.

The Board of the Fund in its recent report on Ghana stated that the government must consider urgent tax measures like the reintroduction of the controversial 17.5 percent VAT on financial services to overcome perennial tax shortfalls.

Reacting to the IMF’s call, Dr Sarkodie says there is the need to review the impact of the scrapped taxes before taking a stand on whether or not to re-introduce them.

“Those taxes were scrapped because the government said they were nuisance taxes. That is it was burdensome on the Ghanaian population and two, it had a negative impact in the corporate field. However, before we consider the re-introduction, we must assess their effects after the scrap. Did it do us more harm than good or vice versa?”