Finance Minister-designate, Dr. Cassiel Ato Forson, has set an ambitious target to raise Ghana’s tax revenue from the current 13.8% of Gross Domestic Product (GDP) to 18% over the medium term. During his vetting, Dr. Forson explained that while this target may seem high, it aligns with what Ghana’s peers on the continent are already achieving in terms of the Tax-to-GDP Ratio. However, meeting this target will require more than just increasing tax rates—it will demand effective tax compliance, streamlined administration, and, crucially, evidence of responsible use of public funds.
Ghana has long struggled with a low Tax-to-GDP ratio, one of the lowest on the continent, despite introducing new taxes and increasing existing ones. The shortfall in revenue collection is often attributed to low compliance, with taxpayers reluctant to pay due to perceptions of mismanagement and corruption. Additionally, the complicated and often unclear tax administration system has discouraged many from fulfilling their tax obligations.
Economists and analysts are largely supportive of Dr. Forson’s goal, emphasizing that improving compliance, rather than raising taxes, will be key to achieving the 18% target. They argue that plugging tax loopholes, broadening the tax base, and improving tax administration will be more effective. However, a crucial factor remains: citizens need to see tangible proof that their tax money is being used wisely.
Public sentiment strongly suggests that the best way to encourage voluntary tax compliance is through transparent and effective use of the taxes collected. Citizens believe that if the government shows clear, prudent use of the country’s resources, many will willingly comply with tax regulations without the need for enforcement. On the other hand, mismanagement of funds, enrichment of the political class, and open displays of wealth will severely undermine tax compliance efforts, even in the face of stricter enforcement or penalties.
President John Mahama, recently re-elected with an emphatic endorsement, continues to enjoy strong goodwill from the population. Analysts suggest that this goodwill presents an opportunity for the government to gain public trust by demonstrating responsible use of tax revenues, which could, in turn, boost voluntary compliance. The popular sentiment, often expressed as ‘Show working,’ reflects the demand for accountability and transparency in the use of public funds.
