Recent data from the Ghana Revenue Authority (GRA) show that the government was able to mobilize GHC413.6 million from the self-employed last year. According to the GRA, revenues from the Vehicle Income Tax and Tax Stamp amounted to GHC35.8 million in 2020.

Meanwhile, the data revealed that revenues from vehicle income tax continue to decline in the past three years. Specifically, the statistics show that the contribution of Vehicle Income Tax to total informal sector revenues declined from 8.3% in 2017 to 7.3% in 2020.

Likewise, Tax Stamp, which is one of the major contributors to informal sector revenues, also declined marginally over this period. Per the GRA’s current data, the contribution of Tax Stamp to the informal sector revenues declined from 1.4% to 1.3% in the same period under review.

Despite a fast-growing informal sector economy, data from the GRA has shown a constant decline in tax collection from the sector in recent times. Meanwhile, the Ghana Living Standards Survey round 6, pegs the population of operators in the informal sector at 90 percent of the country’s workforce. This means there is a sharp contrast in revenue collection from the sector and its population.

Improving revenue collection from the sector

To address this concern, Dr. Martin Yamborigya, head of Audit-LTO at the GRA highlighted some remedial actions that need consideration. Speaking at a virtual forum, Dr. Yamborigya noted that the first step is to identify and register all eligible taxpayers in the informal sector. According to him, these tax payers should be put in identifiable groupings.

Dr. Yamborigya stated that the GRA is leveraging the use of the Ghana Card to widen the tax net. Also, he indicated that the authority is using professional bodies and groups to identify and register all professionals who are operating like players in the informal sector.

Furthermore, Dr. Yamborigya pointed out that it is important to implement the Modified Taxation System for the large informal economy. This, according to him, will make it easier for operators in the area to fulfil their tax obligations to the state.

“There is also a need to simplify enforcement and compliance at the retail and micro level by coming up with simplified record-keeping materials for our people”.
Dr. Yamborigya

Moreover, Dr. Yamborigya proposed a simple method of assessing income by using a flat tax regime under a modified taxation system. He believes this will make tax collection convenient for players in the informal sector.

Vital role of technology

Also, Dr. Yamborigya indicated that the modified system will help expand the scope for small entities. Furthermore, he highlighted that technology will play a vital role in improving informal sector revenue collection.

“I must add that we must also leverage on technology to simplify collection and payment of the 3% flat tax in the sector, which is very important”.
Dr. Yamborigya

A recent World Bank study show that the potential tax revenues from sole proprietors could amount to 12.6% of GDP. This means that the country must design a system fit enough to help mobilize revenues from the sector. self-employed self-employed self-employed