A director and partner at WTS Ghana, Richard Amo-Hene, has called for a re-evaluation of Ghana’s tax system, urging the state to strengthen the collection system rather than imposing new, higher taxes that appear burdensome.
During a presentation at the Ghana Germany Economic Association (GGEA), he urged the government to consider reduced tax rates and exemptions.
According to Mr Amo-Hene, the ultimate aim of the government for introducing new taxes and revising existing ones is to raise enough revenue to finance its budget, with hopes of improving the tax-to-GDP ratio from the current 12.5% to about 20%. To achieve this, the government expects to raise about GHC176 billion from taxes.
E-tax
Presenting alternatives to the government, the tax expert indicated that the expected tax revenue can be achieved without additional taxes. He pointed out that data suggest Ghana is known to have high taxes, yet it is one of the lowest performers in tax-to-GDP ratios.
“VAT between 2011 and 2024, for instance, has increased up to 21.9%. PAYE rates have also increased to the extent of 35% of the highest tax band, and new taxes such as the Covid-19 Levy, E-levy, Growth and Sustainability Levy, among others, have not been able to help the government achieve the tax revenue target,” he said.
In his view, high taxes lead taxpayers to seek efficient avoidance schemes and, to a large extent, evade schemes to reduce their burden, he therefore urged the government to consider reducing taxes and enhancing its digitalization system to improve collection.
He indicated that the current manual system had led to leakages resulting in revenue losses between GHC700 million to GHC1 billion. He said, as of 2020, there were 5 million unregistered taxpayers.
He indicated that with an enhanced system, between GHC24 billion to GHC30 billion in taxes could be raised, with CIT revenue increasing between GHC3billion – GHC6 billion, VAT between GHC13 – 14 billion, and Customs between GHC5 – GHC8 billion.
“Currently, VAT contributes about 24% of tax revenue. Thus, with an efficient system implemented, there would be an average of GHC35.60 billion raised in VAT revenue instead of an expected GHC23.68 billion as a result of implementing this Audit Tool/Module,” he said.
He has therefore commended GRA and the government for the implementation of the E-VAT system.
Exemptions
Meanwhile, Mr. Amo-Hene has questioned the increasing tax exemptions in the system, saying the principal reason for the introduction of tax exemptions is to achieve economic growth through an increase in investment.
However, he said, tax exemptions are hidden costs to the government, necessitating a cost-benefit analysis to determine whether they should be continued.
He added that some studies had pointed out that not less than GHC1.5 billion exemptions are given on imports annually in Ghana.
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