After grappling with below below-average tax-to-GDP ratio, Ghana’s revenue mobilization is set for a massive overhaul as the Minister for Finance-designate has outlined an ambitious plan to increase the country’s domestic tax revenue.
Dr. Cassiel Ato Forson said his vision is to increase the country’s tax-to-GDP ratio from 13.8% to about 16 – 18% within the medium term to match Ghana’s peers.
The current 13.8% is far below Ghana’s peers in Sub-Saharan Africa (SSA) and Lower Middle-Income Countries (LMIC), with an average of 18.4% and 17%, respectively. This low revenue mobilization has greatly impacted the country’s debt financing and funding of socio-economic development.
Interestingly, the Finance Minister-designate hopes to increase the tax-to-GDP ratio without necessarily increasing taxes. He told the Appointments Committee of Parliament that the country has huge untapped revenue potential but the major problem is compliance.
Emphasizing that achieving this target does not require new tax hikes but a robust improvement in compliance and efficiency, he noted that his strategy will focus on strengthening partnerships with key agencies, including the Ghana Revenue Authority (GRA) and the Ministry’s Tax Policy Unit.
“Ghana currently collects approximately 13.8% of GDP in terms of tax revenue. We can do better. I’ve studied the Ghana economy for some time and I can say that Ghana has huge potential when it comes to tax revenue mobilization,” he stated.
He therefore announced that, “You don’t necessarily have to increase taxes before you rake in revenue. We have the handles, what we need to do is to improve compliance. I will work with the GRA, the tax policy unit of the Ministry of Finance, to ensure that we increase compliance and raise the revenue as much as we can.
“In the medium term, it is my vision when approved to increase the tax revenue from 13.8% of GDP to about 16 to 18%. That we’ll be able to compare ourselves to our peers. I believe the potential is out there. It doesn’t necessarily mean we should increase taxes,” he added.
