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An Economist, Dr John Kwakye believes that the 18 per cent tax revenue proposal by Finance Minister-designate Dr Cassiel Ato Forson can be achieved by plugging numerous tax loopholes.
Similarly, he said, it can be done through widening the tax net and transforming of tax administration.
“The tax revenue/GDP ratio of 18% proposed by the Finance Minister over the medium-term can be achieved by plugging the numerous tax loopholes, widening the tax net and strengthening tax administration,” the Director of Research at the Institute of Economist Affairs (IEA) he wrote on his X.
Dr Cassiel Ato Forson had stated that government is targetting a significant boost in tax revenue, aiming to increase its contribution to Gross Domestic Product (GDP) from the current 13.8 percent to 18 percent in the medium-term.
This was disclosed during his vetting in parliament on Monday, January 13, 2025.
According to Dr. Forson, the country has substantial untapped potential in tax revenue mobilisation which can be harnessed without imposing additional taxes.
“We do not necessarily have to increase taxes to generate revenue, there is a need to improve compliance and address inefficiencies in the tax system,” he said.
He believes that the aspirational target of achieving a 20 percent tax-to-GDP ratio by 2027 was overly ambitious, given current challenges.
A revised study titled ‘Survey of the Ghanaian Tax System’, conducted by the Ministry of Finance in collaboration with TaxDev researchers from the Institute for Fiscal Studies (UK) and published in 2024, revealed that although the prevailing tax-to-GDP ratio is nearly six percentage points higher than in 2000, it has shown limited improvement since 2017 and continues to fluctuate.
While the nation’s tax-to-GDP ratio aligns closely with the average for sub-Saharan African countries, it falls slightly below the global average for nations with similar income levels. Among 28 lower-middle-income countries with available data, Ghana ranked 16th in 2022.
The growth in domestic tax revenues since 2000 has largely been driven by increases in corporate income tax, personal income tax and value-added tax (VAT).
Together, these three tax categories accounted for nearly 70 percent of total tax collections in 2022 – up from 57 percent in 2000. However, revenue growth from personal income tax and VAT has stagnated in recent years.
Revenue from international trade has become a less significant contributor to the overall tax mix, though it remains important. In 2022 taxes on imported goods, including VAT on imports, made up 33 percent of total tax revenues compared to 54 percent in 2000. Specifically, the contribution of import duties to total tax revenue declined from 18 percent in 2000 to 13 percent in 2022.
The Finance Minister nominee also outlined plans to collaborate with the Ghana Revenue Authority (GRA) and Tax Policy Unit of the Ministry of Finance to implement strategies aimed at boosting compliance.
“In the medium-term, my vision – when approved – is raising the tax-to-GDP ratio to between 16 percent and 18 percent; bringing us closer to the standards of our peers,” he stated.
The nominee also expressed his determination to scrap what he described as ‘nuisance taxes’ – such as the betting tax, which he argued contributes minimally to revenue generation.
“The betting tax brings in less than GH¢50million annually. Scrapping it will have negligible economic consequences but will address public dissatisfaction with such levies,” he added.
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