The Finance Ministry’s bid to nearly double the amount of taxes collected over the next three years has been described as ambitious by Abeku Gyan-Quansah, a Tax Partner at PwC Ghana, the accounting and audit firm.
Minister of Finance Ken Ofori-Atta, presenting the 2020 Mid-Year Budget Review and Supplementary Estimates last week, said as part of the COVID-19 Alleviation and Revitalisation of Enterprises Support (CARES) programme, government intends to drive up its tax revenue to 20 percent of GDP by 2023.
In 2019 Ghana’s tax revenue as a percentage of GDP stood at 12.2 percent – which was lower than the 17 percent average for sub-Saharan African countries.
Mr. Gyan-Quansah, in an interview with Business24, stated that historically, the country has not seen any major increase in the tax-to-GDP ratio – the reason why any astronomical rise will be a huge task.
“We projected our tax-to-GDP ratio based on the 2020 budget to be about 12.5 percent. Right now, based on the revised budget, we are going to do barely 11 percent of GDP. From 11 percent to 20 percent, we are basically looking at doubling it. The question is, are we really ready for the doubling?” he said.
He noted that the country has not seen remarkable growth in its tax-to-GDP ratio over the years due to a number of challenges which still remain unresolved.
One of the impediments Mr. Gyan-Quansah cited was the low tax compliance culture.
“For example, from 2016, the law required that even if you are an employee and all your income is from employment, you should file an income tax return at the end of the year. You can do a survey to find out how many are really aware; of those that are aware, how many are concerned and have indeed filed their income tax returns,” he asked.
The tax expert explained that some of the reasons accounting for the stagnation in tax revenue could be that potential taxpayers remain unconvinced about how their taxes are utilised.
He noted that there is also a general sense of low tax education among the public, and in some instances, there are bottlenecks when one decides to voluntarily make payments.
Mr. Gyan-Quansah suggested that for government to raise tax revenue to the levels its desires, it must actively deal with these impediments in a holistic manner.
The Finance Minister, in the 2020 Budget presented last year, made proposals to improve domestic revenue mobilisation, ensure efficiency in revenue collection, support individuals, and prevent revenue leakage.
Presenting the mid-year budget, the Finance Minister noted that the Ghana Revenue Authority has made progress regarding some of the measures.
The tax collection agency, Mr. Ofori-Atta said, has commenced the imposition of the withholding tax on sale of precious minerals by small-scale miners, which has been sitting in the statute books since 2016.
Also, a Tax Audit and Quality Assurance Department has been established to ensure quality audits and revenue assurance, in addition to an end-to-end Electronic Metering Management System (EMMS) and Monitoring Centre to validate and assure the quantity of petroleum products transported from the various depots and bunkering sites.
Another measure he mentioned is the recent deployment of a new customs administration system—the Integrated Customs Management System (ICUMS)—to ensure a more efficient management and collection of customs duties and taxes.