With a few days to the crucial 2024 General Elections, the numerous campaign promises for tax cuts by leading figures in the elections have come under huge criticism.
Financial Analyst Dr. Richmond Atauhene argues that the wave of tax cuts ahead of the elections could exacerbate the nation’s already fragile economy adding that they do not align with Ghana’s fiscal realities and long-term development needs.
In his own words, Dr. Atuahene says “Politicians talking about tax cuts are all living in yesterday’s world so far as the country is under an IMF programme.”
The financial analyst says he cannot understand why a country with an alarmingly low tax-to-GDP hovering around 12% – far below the Sub-Saharan African average of 16% will be considering further tax cuts. The difference is more staggering when Ghana is compared to countries such as South Africa and Kenya which are currently doing 28% and 18% respectively.
He attributes this shortfall to structural inefficiencies, including a large informal sector, weak tax compliance, extensive exemptions, and outdated administrative systems. By focusing on slashing taxes, Dr. Atuahene believes politicians risk deepening these systemic challenges, which already undermine the government’s capacity to fund critical infrastructure and social services.
He further argues that Ghana’s tax systems are less progressive relative to South Africa and Kenya which have higher income earners paying more.
In a paper copied to The High Street Journal, the financial analyst noted that “Ghana tax structure has been less progressive over the years, with lower rates and substantial exemptions that dilute the tax base.”
In his view, instead of the numerous tax cuts, the next government must rather concentrate on diversification of its tax revenue streams to complement the already existing shortfall.
“Ghana is yet to fully capitalize on diversification of its tax revenue streams through the introduction of environmental levies, properties taxes, and taxes on digital services,” adding that the Value-Added Tax Framework requires a complete overhaul to deal with the structural defects and the pervasive evasions and exemptions.
