Ghana’s position in the global comparison of tax regimes continues to raise concerns as it scores 56 on the Paying Taxes indicator in the latest Doing Business Report, falling below the Sub-Saharan Africa average of 57.8.
This development placed Ghana at a miserable 152 out of 190 countries, showcasing a decline from its 2017 ranking of 122 with a score of 62.9.
The Paying Taxes indicator meticulously evaluates tax regimes and regulatory payment systems worldwide. The 2020 report reveals that taxes and statutory payments in Ghana may absorb up to 55% of profits, surpassing the regional average of 47.3%.
Ghana’s business environment ranking further slipped to 118 in 2020 from 108 in 2017, according to the World Bank’s Doing Business Report. This comprehensive report scrutinizes global business regulations, emphasizing the administrative burdens associated with tax payments and contributions for medium-sized enterprises.
In Ghana, a business entity is required to make 36 payments annually, involving a total commitment of 226 hours to fulfill its obligations. In contrast, South Africa, ranked 54, demands only 7 payments, consuming 210 hours and costing up to 29.2% of profits. Nigeria, at 159, imposes 48 payments per year, consuming 38.4% of profits and 343 hours. Meanwhile, a business in Rwanda is obligated to make 9 payments, spending 91 hours and 33.2% of profits.
Meanwhile, economists and policy makers are urging Ghana to implement measures to enhance domestic revenue mobilization and improve its tax administration regime. The Ghana Revenue Authority’s (GRA) 2022 Annual Report indicates a tax-to-GDP ratio of 13.1%, considering a non-oil GDP of GH¢577,282.96 million.
Ghana’s debt, standing at GHS575.5 billion in June, represents 71.9% of GDP in the first half of 2023, according to the Bank of Ghana’s Summary of Economic and Financial Data. To manage public debt, the government introduced debt exchange programs, a part of its strategy towards economic stability, a prerequisite for an International Monetary Fund (IMF) program.
The Ongoing Three-Year US$3 billion IMF Loan-Support Program
The ongoing three-year US$3 billion IMF loan-support program, initiated in 2023, aims to make Ghana’s debt sustainable, requiring the government to enhance domestic revenue mobilization. In response, the GRA implemented new tax compliance measures, sparking concerns among trade associations.
The Traders Advocacy Group Ghana (TAGG) criticized the GRA, alleging that the authority was misleading the public and engaging in extortion and bribery through its taskforce. TAGG called for an investigation into these claims.
Despite the GRA’s assurance, under Commissioner-General Rev. Dr. Ammishaddai Owusu-Amoah, that it had exceeded its revenue targets, generating GH¢178.16 billion between 2020 and 2022, the ongoing debate surrounding tax policies in Ghana underscores the delicate balance between revenue generation, economic stability, and regulatory efficiency.
Ghana’s tax regime presents a complex landscape, with the country scoring below the Sub-Saharan Africa average on the Paying Taxes indicator. The decline in ranking from 2017 to 2023 reflects challenges in the tax system, with businesses facing a substantial administrative burden and high costs. The comparison with other African nations underscores the need for Ghana to streamline its tax processes to enhance competitiveness and attract investments.
Economists’ calls for improved domestic revenue mobilization align with the government’s efforts, as evidenced by the introduction of new tax compliance measures. However, these measures have not been without controversy, with trade associations expressing reservations and demanding investigations into alleged extortion and bribery.
The broader economic context, with Ghana grappling with a significant debt-to-GDP ratio, emphasizes the urgency of efficient tax policies. The ongoing IMF loan-support program serves as a crucial initiative to make the country’s debt sustainable, with a requirement to enhance domestic revenue mobilization. Achieving this balance will be pivotal for Ghana’s economic stability and its ability to meet both short-term financial obligations and long-term development goals.
As Ghana navigates these challenges, a comprehensive and collaborative approach between the government, business community, and regulatory authorities is essential. Addressing the concerns raised in the Doing Business Report and fostering an environment of transparency and efficiency in tax administration will be key to positioning Ghana for sustainable economic growth in the evolving global landscape.
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