After successive governments have shown little to no interest in streamlining and improving the property tax system, an economist is emphasizing that it is of one the best means for the nation to improve its tax revenue.
Ghana’s tax system is often criticized for its heavy dependence on the formal sector where less effort is made to broaden the tax base. There is an overconcentration in some areas as many other areas with huge potential have been overlooked and underutilized.
With the inefficiencies in the tax administration, Vice President and flagbearer of the governing New Patriotic Party (NPP), Dr. Mahamudu Bawumia has promised to introduce some reforms with initiatives such as a flat rate system among others.
However, an economist at the University of Ghana Business School, Prof. Patrick Asuming believes the important focus should be on the country’s uncollected taxes especially, property tax.
Prof. Asuming reveals that the World Bank estimates the country is mobilizing less revenue than what it is supposed to earn – leaving a significant amount uncollected. He is therefore advocating that emphasis should rather be on improving the tax effort where uncollected are efficiently mobilized.
“For me, it is the uncollected tax. Our tax effort, even the VAT in recent World Bank document tells us that we are not even collecting 70% of what we are supposed to realize. For me, we have to fix those issues and our challenges with the property rate. It is heavily uncollected and we struggle to collect that tax,” he told The High Street Journal in an interview.
He further downplayed the Vice President’s promise to grant tax amnesty to tax defaulters. According to the economist, the numerous tax amnesties granted are doing more harm than good to the economy by robbing the country of the needed revenues.
“It is interesting to see that they are planning to give more tax amnesty. We have had so many tax exemptions which cost the economy so much,” Prof. Asuming expressed his worry.
The call by the economist corroborates an earlier advice to the government by the international professional services firm, Deloitte. Deloitte in its analysis of the 2024 Mid-Year Budget called for the re-institution of the integrated property tax system to ensure efficient assessment and collection of property tax.
It is estimated that should proper measures be implemented, Ghana can raise GHC12 billion alone in property taxes annually.
Ghana’s tax-to-GDP ratio which currently stands at 14.1% has been described as woefully inadequate compared to other Sub-Saharan African countries such as South Africa, Seychelles, Senegal, Namibia, Mauritius, Lesotho, Eswatini, Capo Verde, Burkina Faso, and Botswana, who have theirs around 20% tax-to-GDP ratio.
The Medium-Term Revenue Strategy (MTRS) of the government has set a target to increase the rate from 14.1% to between 18% and 20% by 2027.
It is anticipated increasing the tax effort of the country as desired by the economist by paying attention to underutilized revenue areas such as property tax can help to achieve this target. With an improved tax effort, the government can meet its debt obligations, and also undertake social development projects to improve the lives of citizens.
