Ghana can generate substantial additional domestic revenue by improving Value Added Tax (VAT) and corporate income tax compliance. The Tax Justice Coalition-Ghana stated this, highlighting significant opportunities within the current tax framework.
This approach focuses on closing existing tax gaps, which could yield more revenue without introducing new taxes or increasing current tax rates. The Coalition emphasizes broadening the tax base and enhancing compliance as key strategies. These measures aim to support Ghana's development financing needs effectively.
This recommendation comes as Ghana seeks sustainable ways to boost its public finances amid ongoing economic pressures. The country has historically grappled with revenue mobilization challenges, often relying on external borrowing. Improving tax collection efficiency is crucial for reducing fiscal deficits and funding essential public services. Previous government efforts have also targeted increasing the tax-to-GDP ratio.
Mr. Benedict Doh, National Coordinator of the Tax Justice Coalition-Ghana, confirmed these findings in an interview. He stated, "We have noticed from a number of our studies that tax gaps exist when it comes to VAT and corporate income tax." Mr. Doh also coordinates the Tax Justice Platform and works with Transparency International Ghana.
The government will likely consider these recommendations as it formulates future fiscal policies. Policymakers will need to assess the feasibility and impact of strengthening tax administration and compliance measures. Increased transparency in tax exemptions and addressing illicit financial flows will also be critical areas to watch for reforms.
Mr. Doh highlighted that available studies indicate significant gaps within the VAT and corporate income tax regimes. These gaps suggest considerable revenue remains uncollected under the existing tax framework. Improving tax administration and bringing more taxable economic activities into the formal system could increase domestic revenue.
Broadening the tax base remains one of the more sustainable approaches to domestic revenue mobilization. This strategy can support Ghana’s development financing needs without placing additional pressure on existing taxpayers. It ensures a fairer distribution of the tax burden across the economy.
Illicit financial flows (IFFs) present a major challenge to revenue mobilization, Mr. Doh noted. The movement of illicit funds out of the country deprives the state of vital resources. These resources could otherwise be invested in infrastructure, education, healthcare, and other essential public services. Addressing IFFs requires concerted efforts from various stakeholders.
Mr. Doh also called for greater transparency and accountability in granting tax exemptions. The Tax Exemptions Act, passed in 2022, requires publishing annual tax expenditure reports. These reports detail the value of tax exemptions granted by the state. The Act also provides for cost-benefit analyses to determine if economic benefits justify forgone revenue.
Effective implementation of these provisions would strengthen public accountability. It would also provide policymakers with information to assess the effectiveness of tax exemption regimes. Increased disclosure of beneficial ownership information for companies receiving tax exemptions is also crucial. This ensures that the true beneficiaries of tax breaks are known.
On tax equity, Mr. Doh stressed that reforms should promote fairness. They must avoid worsening existing social and economic inequalities. The Coalition advocates for greater attention to the gender dimensions of taxation. This ensures tax policies do not disproportionately affect women and vulnerable groups. Poorly designed tax policies could deepen inequality in society.