Financial analyst and banking consultant, Dr. Richmond Atuahene has observed that Ghana is losing a significant amount of tax revenue as a result of the failure of the revenue authority to effectively and efficiently tax high-net-worth individuals (HNWI and politically exposed persons (PEPs).
Dr. Atuahene says not only is the country losing billions in revenues, the situation is deepening the inequality gap in the country.
The Financial analyst reveals that these HNWI and PEPs who are at the top of Ghana’s wealth ladder deploy complex financial architecture and engineering to evade paying the required amount of taxes.
He further adds that political influence is also used by these persons to skip paying the right taxes exacerbating income inequality and reducing tax revenues that could otherwise fund essential government projects.
In a document on tax reforms cited by The High Street Journal, Dr Atuahene mentioned that there is a “failure on the part of Ghana Revenue Authority to adequately deal with high net wealth individuals including politically exposed persons (PEPs) in Ghana.”
The complex financial structures deployed by these persons, Dr. Atuahene says make it difficult for the Ghana Revenue Authority (GRA) to efficiently and effectively tax them as done in countries such as Uganda and Rwanda.
“Mobilizing tax revenues from the HNWIs presents enormous challenges to tax administrations due to the complexity of their financial affairs, possible political influence, and usage of aggressive tax planning to minimize effective tax rates,” he noted.
The situation he says brings gaping disparity in the tax burden which mostly affects the poor. While low-income earners are grappling with nuisance taxes such as E-levy, betting tax and COVID-19 levy which significantly reduce their incomes, the wealthiest through unfair means are escaping their required obligations.
This disparity not only worsens inequality but also fosters resentment among taxpayers who perceive the system as unjust and unfair.
“Neglecting this highly visible group of taxpayers not only affects the country by sizable reduction of tax revenue collections from them but can also lead to the erosion of trust in the fairness of tax administration. The perceived unfairness in the tax system could serve as a cancer for tax administration and worsen non-compliance in the wider taxpayer population,” he indicated.
He argues that is now time for the GRA to deploy innovative and sophisticated strategies that will effectively capture the right amount of taxes these HNWI and PEPs are obligated to pay. The effective amount obtained he says, can help to fund projects which can help bridge the widening inequality gaps in the country.
“High and rising income inequality in Ghana particularly necessitate tax compliance from these wealthy individuals to finance government’s developmental projects, without overburdening the poor. This project should be devoid of any political manipulations and machinations and this could go a long way to improve the fiscal space,” he recommended.
Dr. Atuahene further states that effectively taxing those who sit at the top of Ghana’s wealth pyramid can also play a crucial role in abolishing some obnoxious taxes such as E-levy, and COVID-19 levy among others which are making the poor poorer.
