Ghana’s current tax structure is driving tax evasion, encouraging corruption, and placing an unsustainable burden on a small segment of formal workers, this is according to Professor Peter Quartey, Director of the Institute for Statistical, Social and Economic Research (ISSER).
Speaking at the Graphic Ecobank Economic Forum, Prof. Quartey strongly criticized the country’s tax framework for prioritizing revenue targets over equity and efficiency. He warned that the prevailing regime not only distorts business behavior but also risks deepening inequality by enriching a select few.
“Our tax levels are too high, in my view. Our VAT is 21% plus. Some are even straight levies that you cannot claim input tax, and what have you? But look at our competitors. On average, some are paying 15%, 18%, and we are charging over 21%. So what you are doing is that you are encouraging people to evade,” he said.
According to Prof. Quartey, the high tax burden has incentivized informal arrangements between revenue officers and businesses, undermining the integrity of the entire system.
“When your tax is too high, it calls for tax evasion. So you are enriching customs officials, you are enriching businessmen, and the government is struggling for money,” he stated, painting a stark picture of a system that punishes compliance and rewards manipulation.
He also highlighted the imbalance in tax contributions, pointing out that Ghana’s largely informal economy, estimated at over 80%, remains mostly untaxed. This, he said, leaves the burden squarely on the shoulders of the formal sector, which makes up less than a quarter of the economy.
“All we do is the 20%. Why should we focus so much on the 20% and over tax them and leave the 80%?” he asked.
Prof. Quartey called for a complete overhaul of Ghana’s tax policy, beginning with a serious review of the VAT system. He urged the government to widen the tax net by bringing the informal sector into the fold through engagement and education rather than compulsion.
He cautioned that simply increasing taxes will not yield higher tax-to-GDP ratios if the broader structural issues are not addressed.
“Tax to GDP at best, 14%, when some are doing 18, 20, 23% within Africa. So it tells you there is a lot of risk inherent to risk,” he noted.
The ISSER Director stressed that to enhance voluntary compliance, government must not only raise revenue effectively but also spend it wisely to reflect public interest.
