The government of Ghana, through its policy initiatives, is stepping up efforts to improve domestic revenue mobilization in the country by exploring ways of taxing the informal sector which accounts for a chunk of the country’s working population.
In line with this, the Deputy Minister-designate for the Finance, John Kumah has hinted that the government is planning on rolling out a new program. According to Mr. Kumah, the initiative tagged, Revenue Assurance Compliance and Enforcement (RACE) program, will help the government to efficiently tax the informal sector.
Mr. Kumah further stated that the RACE program, in addition to other innovative reforms, will ensure that the informal sector is rolled on to the government’s tax net.
Meanwhile, the Deputy Minister-designate warned that the government will continue to experience revenue shortfalls if it does not tax the informal sector. According to him, the government must put in place measures within the short to medium term to ensure players in the informal sector pay their taxes.
Efficient revenue mobilization critical for development financing
Furthermore, Mr. Kumah indicated that efficient revenue mobilization is critical for Ghana’s development financing. He, therefore, argued that there is the need to leverage innovation to improve the country’s revenue mobilization.
“So, if you don’t have an effective way of collecting taxes in the informal sector, then you are losing a lot. We really need to have new innovative interventions to help tax things like night business”.
Mr. Kumah stressed that the RACE program will help the government take “more from the informal sector to support national development”. Meanwhile, he backed his call for the need to tax the informal sector by providing some statistics. According to him, “statistics show that 90% of our working population are in the informal sector”.
On its part, the GRA has moved its revenue collection online effective June 1, 2021. This forms part of the Authority’s digitization agenda, which experts believe will make revenue collection more effective and efficient. With this move, the GRA has stopped accepting cheques for the payment of taxes and levies in any of its Domestic Tax Revenue offices.
Online tax payment to benefit businesses
Meanwhile, the President of the Ghana Union of Traders Association (GUTA), Dr. Joseph Obeng is hopeful businesses will embrace the online tax payment. He noted that the spillover effect of the GRA meeting its target will be positive on businesses; a reduction in taxes.
Even though there have been several attempts to improve the country’s revenue mobilization over the years, not much has been achieved. Ghana’s domestic revenue mobilization is among the lowest in the South Saharan-African region. According to an IFS report, Ghana’s tax-to-GDP ratio has only increased by 5% in the past 11 years and stands at 13% as of 2019. Consequently, the IFS has expressed worry that the country may not meet government’s target of 20% by 2023.
However, recently, the government of Ghana and the Ghana Revenue Authority (GRA) are keen on improving revenue mobilization, especially when COVID-19 has over-stretched government’s budget.