Finance Minister-designate, Dr. Cassiel Ato Forson’s vision to raise Ghana’s lagging tax-to-GDP ratio from 13.8% to 18% has been described as highly ambitious.
Tax Expert, Francis Timore-Boi says the target is very bold considering the country’s current tax administration which is grappling with numerous challenges. However, the tax expert believes that despite the challenges, increasing the tax-to-GDP ratio target is achievable.
In an interview monitored by The High Street Journal, Francis Timore-Boi recounted how Ghana has lagged behind its peers in tax-to-GDP ratio. The situation is also not favorable considering the IMF threshold of over 15% for an economy to be described as self-sufficient in terms of domestic revenue.
“It is very ambitious, but I think it’s doable. Currently, we are doing around 14%, and I heard him saying that even the latest number has dropped from 14.1% in 2023 to around 13.8%. Whilst all African countries are doing better, they are above the global minimum. IMF says that for you to describe yourself as a country which is able to govern itself with an internally generated fund, your tax-to-GDP ratio should be more than 15%,” he explained.
To achieve this target, the magic he says lies in the kind of reforms the Finance Minister-designate will introduce if approved.
He recommends that the chunk of the tax reforms should focus on the informal sector. Per his assessment, the informal sector has a huge tax potential but is often neglected due to systemic challenges.
The tax analyst believes that by designing a system tailored for informal businesses and leveraging technology, the many businesses in the sector that often escape the tax net could be easily identified and roped into the system, thereby improving the tax-to-GDP ratio.
“So we really expect that he will reset the tax system. Personally, I have been advocating for a special tax regime for the informal sector. They contribute the largest to the economy, yet we are unable to identify them and even tax them,” he bemoaned.
He added, “We need some reforms in the tax system, and I think that if he is able to do that within his term, he will be able to achieve, even if he is not able to achieve the 18% to 20%, as the GRA themselves have in their strategic plan for 2023 to 2027, he will be able to raise it above the minimum threshold that we have currently. At least we should go beyond 15%.”
It is also worthy of note that the ambition of the finance minister-designate comes at a time when his government has committed to scrapping some taxes deemed nuisance in their first 120 days in office.
With his plans of raising the country’s tax-to-GDP ratio amid a commitment to scrap some tax handles, analysts are keen on the kind of reforms he intends to implement to achieve what has been described as an overly ambitious vision.
