Finance Minister signals tax rationalisation to boost revenue

THE Minister for Finance, Dr Cassiel Ato Forson, has stressed the urgent need to improve Ghana's tax administration to help close the compliance gap and boost revenue mobilisation.

He explained that the country's tax revenue collection, particularly the Value Added Tax (VAT), has significantly lagged behind other countries in the region.

"Ghana has not performed well in revenue mobilisation compared to its peers. Ghana's domestic revenue mobilisation (DRM) has stagnated in the last decade and remains below our peers.”

Collected revenues reached 13.5% of Gross Domestic Product (GDP) in 2023. Collection from all major taxes remains low, especially VAT, as compared to our peer countries," he said.

Economic dialogue

Dr Forson was speaking at the opening of the National Economic Dialogue (NED) 2025 in Accra yesterday on the theme: "Resetting Ghana: Building the Economy We Want Together."

The forum, which seeks to build consensus and foster collaboration among the government and key stakeholders on priority policies and structural reforms, offered a platform for Ghanaians to respond to pressing economic challenges and forge actionable solutions for sustainable economic growth.

He explained that Ghana's complex tax system, compounded by numerous assumptions and exemptions, has contributed to a significant compliance gap, further hindering revenue collection.

Tax exemption

He further outlined how the fiscal cost of tax exemptions was impacting the nation's finances, with the Tax Exemption Act of 2022 providing clear guidance; however, other legislation introduced further tax incentives that deviated from the notional tax benchmark.

He revealed that tax exemptions, particularly from VAT, PIT, and import duties, were estimated to generate a loss in revenue of 3.9% of GDP.

"This does not include tax exemptions on CIT. While these exemptions offer some relief, they are costly, and they create leakages, complexity and distortions," the minister added.

According to him, one of the largest sources of VAT revenue loss was the exemption on the supply of dwellings and land, which accounts for 33% of overall VAT costs.

He added that while VAT on real estate was introduced in 2023, the previous administration abandoned it ahead of the 2024 elections, contributing to the existing revenue loss.

"The reality is that this tax exists but was dropped due to election considerations. If we are serious about closing the VAT gap and improving revenue collection, we need urgent reforms to rationalise the VAT regime," Dr Forson said.

He further called on stakeholders to support efforts aimed at reforming the tax system to make it simpler, more efficient and equitable, noting that such reforms were necessary to ensure that Ghana generates the needed revenue to fund its development agenda.

Extractive sector

Another key area of concern raised by the Minister was Ghana's inability to fully capitalise on its extractive sector.

He said while the country's natural resources contributed to about 14% of GDP, fiscal revenues from the extractive industries amount to only 1.5% of GDP.

This gap, he explained, was due to Ghana's failure to capture the full economic rent of its natural resources, limiting the potential to channel these revenues into productive infrastructure and human capital development.

He also emphasised the need for Ghana to leverage its natural resources to support economic diversification and long-term development goals.