Ghana, like many other developing countries, faces significant challenges in managing its tax system. Unfortunately, the country’s tax system has been plagued by pillaging, resulting in the mismanagement and misuse of tax revenue.

Taxes are pillaged in Ghana through over-taxation where the government imposes high tax rates, leading to a heavy tax burden on citizens and businesses. This not only discourages investment and economic growth but also leads to tax evasion and fraud.

Furthermore, a significant challenge facing Ghana’s tax system is tax evasion and fraud. Government officials and tax authorities have been accused on many accounts of embezzling tax revenue or engaging in corrupt practices, depriving the government of revenue. This is often made possible by a lack of transparency and accountability in tax administration.

Moreover, the misallocation of tax revenue is another critical issue. Tax revenue intended for specific projects or programs is often diverted to fund other initiatives or activities, often for political gain. For instance, the government would rather start a national cathedral project- a flagship project- and abandon it later than invest the money wasted on the project in the country’s deteriorating health sector.

As such, this leads to a lack of transparency and accountability and deprives citizens of essential public services and infrastructure.

In addition to these challenges, Ghana’s tax system is also characterized by unnecessary expenditures, political patronage, and a lack of transparency which perpetuates fiscal indiscipline and corruption in the government.

Accordingly, Franklin Cudjoe, Founder and President of IMANI Africa Policy Think Tank has indicated that despite the current economic state of the country and most Ghanaians, the government continues to squeeze taxes out of citizens.

Citing an instance where the government over taxes citizens, he noted that starting June 2, 2024, customers of Mailchimp – a digital-service provider – in Ghana will see Value Added Tax (VAT) charged on their Mailchimp purchase amount plus levies at the rate of 15%.

The charge for levies on all Mailchimp purchases, he revealed, include the National Health Insurance Levy (2.5%); the Ghana Education Trust Fund Levy (2.5%); and the COVID-19 Health Recovery Levy (1%).

“We all have no problem paying taxes, even as they pile on us like bricks from hell, but we must resist the poor application of these taxes by inconsiderate gangsters in the name of development. Inconsiderate because even in misfortune they pillage. Take the special audit conducted on COVID-19 funds- only 25% of all COVID-19 funds received were spent on direct COVID-19-related issues. See why I keep quoting my favorite American comedian, P.J. O’Rourk, that giving money and power to politicians is like giving whiskey and car keys to teenagers?”
Franklin Cudjoe

Furthermore, he disclosed that VAT and levy regulations in Ghana require foreign digital service providers, like Mailchimp, to charge and collect VAT and levies from their customers.

The VAT and levies that Mailchimp collects, the IMANI President stated, will be paid to the Ghana Revenue Authority (GRA).

Effects On Development

Moreover, Franklin Cudjoe lamented the excessive taxation by the government, emphasizing that the practice overburdens the citizens, and undermines trust in the government.

Furthermore, the pillaging of taxes in Ghana has far-reaching effects on taxpayers as they bear the brunt of excessive taxation, leading to a heavy financial burden.

As such, high taxes reduce disposable income, affecting investment, saving, and consumption which discourages economic activity, leading to reduced investment, production, and employment.

The unfair tax system also encourages tax evasion and fraud, undermining trust in tax authorities.

More so, as tax revenue is not used efficiently, leading to misallocation of resources and inadequate funding for essential public services, taxpayers are not informed about how their taxes are used, leading to a lack of transparency and accountability.

As such, the tax burden falls disproportionately on certain groups, such as small businesses and individuals, rather than being shared fairly across the population.

Furthermore, tax pillaging leads to reduced government revenue, hindering the government’s ability to provide essential public services which hinders economic growth and development, perpetuating poverty and inequality.

To address these effects, the government must reform the country’s tax system, prioritizing fairness, transparency, and accountability.

This includes reducing tax rates, broadening the tax base, and ensuring efficient tax administration which will create a fair and efficient tax environment that supports economic growth, development, and the well-being of taxpayers.

Ultimately, reforming Ghana’s tax system is crucial to address these effects and create a fair and efficient tax environment that supports the well-being of taxpayers and the development of Ghana.