With only 11 days to the polls, the tax policies of Ghana’s two leading political parties, the New Patriotic Party (NPP) and the National Democratic Congress (NDC), are a critical point of focus.
Taxes affect every Ghanaian, from businesses striving to grow to individuals struggling with the rising cost of living. While both parties promise to ease tax burdens, reform the system, and support economic growth, their proposals reveal significant differences, and glaring gaps that could shape the country’s fiscal future.
What the NPP Proposes
The NPP’s tax strategy focuses on simplification, incentives, and modernization. A centerpiece of their plan is a one-time tax amnesty, which would forgive unpaid taxes, penalties, and interest from previous years. This is designed to give taxpayers a fresh start while widening the tax net.
Another major reform is a simplified VAT system, merging all levies into a single line item to eliminate the cascading effect that inflates prices. The NPP also plans to:
- Abolish the Betting Tax, which has discouraged compliance in the gaming industry.
- Reduce Withholding Tax on small-scale gold exports to 1%, aiming to curb smuggling and boost formal transactions.
- Digitize tax administration, making filing easier and reducing revenue losses.
The party argues that these reforms will improve compliance, ease the financial burden on businesses, and increase government revenue efficiently.
What the NDC Promises
The NDC takes a different approach, prioritizing fairness and immediate relief for taxpayers. The party has pledged to abolish the E-Levy, a tax on electronic transactions that many Ghanaians feel has stifled financial inclusion. They also promise to:
- Simplify VAT collection, making it easier for businesses and consumers.
- Conduct fair and non-intrusive tax audits, reducing stress on businesses.
- Introduce a new budget in April 2025 to revise existing taxes and support SMEs.
- Expand the tax net by including more eligible taxpayers instead of raising taxes.
In the extractive sector, the NDC plans to create a mutually beneficial tax environment that attracts investment while ensuring Ghana benefits equitably from its natural resources.
What Both Parties Are Missing
While the NPP and NDC present ambitious plans, their manifestos leave critical issues unaddressed. Ghana’s informal sector, which contributes about 50% of GDP and employs over 80% of the workforce, remains largely untaxed despite its significant economic role.
Drawing lessons from Kenya’s Turnover Tax, which applies a flat rate to small businesses, Ghana could introduce similar measures to bring informal traders into the tax net without imposing undue burdens. This approach would not only expand the tax base but also create a more inclusive tax system.
Another overlooked area is the potential of wealth and property taxes. In South Africa, property taxes generate over $4 billion annually, funding essential local projects. In contrast, Ghana’s property tax revenue contributes less than 0.5% of GDP, highlighting an untapped opportunity. Reforms to update property valuations and digitize tax collection could provide a stable and substantial revenue source for the country.
Taxpayer education is another critical gap in the current discourse. Neither party has emphasized the importance of educating citizens about their tax obligations and the benefits of compliance. Without such efforts, even simplified tax systems are unlikely to achieve higher compliance rates, as mistrust and lack of awareness often deter taxpayers.
Tax evasion, particularly in the extractive industries, poses a significant challenge for Ghana. Millions of dollars are lost annually to avoidance practices. Zambia’s experience demonstrates how stricter transfer pricing regulations can increase mining tax revenue by 27%, showcasing the potential for Ghana to recover substantial revenue by addressing similar gaps.
Lastly, environmental and social taxes are conspicuously absent from both manifestos. Countries like Sweden have leveraged carbon taxes to generate billions in revenue while significantly reducing emissions. Ghana could adopt similar measures, such as carbon levies or plastic taxes, to raise funds for environmental initiatives and promote sustainability, addressing pressing ecological concerns while boosting government revenue.
Taxes are central to Ghana’s economic future. Beyond funding public services, a well-designed tax system can drive investment, create jobs, and reduce inequality. However, both parties’ proposals raise questions about sustainability, fairness, and inclusivity.
Global Lessons on What’s Possible
Ghana’s tax-to-GDP ratio stands at 13%, falling below the African average of 16.5%, indicating a need for revenue diversification. Expanding the tax base and implementing property tax reforms could significantly increase this ratio, providing the government with more resources to fund public services and infrastructure. Targeted efforts to broaden the tax system would not only enhance revenue but also promote fiscal stability.
Equity and growth are key considerations in tax policy. Wealth taxes, as successfully implemented in South Africa, and incentives for the informal sector, like Kenya’s turnover tax, illustrate how thoughtful reforms can balance fairness with effective revenue generation. By introducing measures that ensure all sectors of society contribute equitably, Ghana could foster a more inclusive and resilient economy.
Environmental responsibility is another area with untapped potential. Carbon taxes in countries like Sweden have proven effective in generating substantial revenue while reducing emissions and promoting sustainability. By adopting similar measures, Ghana could address pressing environmental issues while creating a new stream of revenue to fund green initiatives and infrastructure development.
As voters prepare to cast their ballots, it’s essential to not only consider the promises made but also the opportunities missed. Learning from global examples and addressing these gaps could transform Ghana’s tax system into a tool for equitable growth and sustainable development.
