The Ghana Revenue Authority is proposing to extend the Modified Taxation Scheme to qualifying small limited-liability companies with annual turnover of up to GH¢750,000, a shift designed to prevent very small incorporated firms from being pushed automatically into a tax-compliance framework built for larger companies.
The proposal matters because it targets a persistent weakness in Ghana’s tax system: the tension between formalisation and compliance costs. Government agencies encourage entrepreneurs to register businesses formally, but incorporation can expose even very small firms to accounting, filing and corporate-tax requirements that are disproportionate to their scale. GRA’s proposed reform seeks to narrow that gap.
It is important, however, to distinguish the proposal from the rules currently displayed on GRA’s website. The Authority’s published Modified Taxation guidance still lists GH¢500,000 as the ceiling for the Presumptive Tax Based on Turnover and Modified Cash Basis categories, while GRA officials have also publicly referred to a GH¢750,000 ceiling aligned with the revised VAT threshold. The new proposal would make eligibility for qualifying small companies explicit through legislative amendments.
The Proposal Targets a Formalisation Penalty
At the September 9 stakeholder workshop in Accra, GRA’s Technical Advisor and MTS Committee Chair, Elsie Appau-Klu, said the current application of the scheme has largely focused on individuals and sole proprietors. Small firms that incorporate can therefore lose access to simplified taxation even when their turnover remains modest.
“We want a Ghana where a small business is not punished for becoming formal,” she said.
That principle has an important economic rationale. Formalisation should improve record-keeping, access to finance, contracting opportunities and the ability of firms to grow. If the tax system makes incorporation significantly more expensive before a business has developed the capacity to meet complex obligations, entrepreneurs may have an incentive to remain informal or understate their scale.
GH¢750,000 Is a Proposed Alignment Point
The proposed GH¢750,000 ceiling is intended to align the simplified regime more closely with the VAT registration threshold for businesses dealing in goods. That VAT threshold was raised from GH¢200,000 to GH¢750,000, removing many micro and small enterprises from mandatory VAT registration.
But the number should not be treated as though Parliament has already extended the MTS to small companies. GRA says its legal and policy teams are working with the Ministry of Finance on the necessary amendments, with proposals for legislative changes envisaged by December 2026. Until those amendments are enacted, the expansion remains a policy proposal.
The reform also sits alongside the Authority’s broader attempt to modernise tax administration through ITAS, where better taxpayer data and simpler digital processes are meant to improve compliance without relying only on higher statutory tax rates.
A Wider Base Is Better Than Repeated Rate Increases
For Ghana’s public finances, the attraction is clear. A simplified regime can bring more firms into the tax net, improve filing and build a record of business activity that becomes more useful as enterprises grow. Broadening the base through easier compliance is generally less distortionary than repeatedly increasing rates on taxpayers that are already visible to the system.
The risk is design. A turnover threshold can create incentives for firms to suppress reported sales or split operations if crossing the threshold produces a sudden increase in compliance costs. GRA will therefore need clear transition rules so that growing beyond GH¢750,000 does not create a sharp tax cliff.
The tax treatment itself also needs to be communicated carefully. The existing MTS includes different categories, including a 3% presumptive turnover tax for qualifying taxpayers under current guidance. The September proposal does not by itself establish that every newly eligible limited-liability company would automatically pay that same rate. The final legislation and administrative guidance will determine the precise treatment.
Small Firms Need Simplicity Without a Revenue Loophole
For small businesses, the potential benefit is lower compliance friction. For government, the gain would be a larger and more traceable taxpayer base. The challenge is achieving both without creating a route for larger businesses to reorganise themselves merely to obtain simplified treatment.
That makes eligibility tests, beneficial-ownership checks and turnover verification important. The reform should reward genuinely small firms for formalising, while ensuring that the simplified system does not become an avoidance channel.
What matters next is therefore legislative detail. Businesses should watch how Parliament defines qualifying companies, whether the GH¢750,000 ceiling is formally adopted for the expanded scheme, how the tax rate or assessment method is set, and how firms graduate into the standard corporate regime as they grow.
If those details are handled well, the proposal could turn tax compliance from a barrier to formalisation into a more gradual part of business growth.
The broader economic test will be whether simpler taxation increases the number of compliant firms without slowing their transition into larger, more productive enterprises. A successful small-business regime should make compliance easier at the bottom of the tax system while preserving a clear path into the standard regime as firms expand.
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