#GraphicEcobankForum: Ghana’s tax system encourages evasion – ISSER Director

The Director of the Institute for Statistical, Social and Economic Research (ISSER), Professor Peter Quartey, has warned that Ghana’s current tax regime promotes evasion and enriches a select few at the expense of national development.

Delivering remarks at the maiden edition of the Daily Graphic/Ecobank Ghana Economic Forum in Accra, Prof Quartey argued that the imposition of high taxes on individuals and businesses, in a bid to meet fiscal targets, is backfiring and undermining public confidence in the tax system.

“Our tax levels are too high, in my view. Our VAT is 21 per centplus. Some are even straight levies that you cannot claim input tax on. But look at our competitors. On average, some are paying 15 per cent, 18 per cent, and we are charging over 21 per cent. So what you are doing is that you are encouraging people to evade,” he said.

He emphasised that taxation should not merely be a tool for revenue generation, but also a means of influencing behaviour and promoting compliance. However, he noted that Ghana’s approach has created an environment that fosters collusion and corruption between tax collectors and taxpayers.

“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 stressed.

Prof Quartey lamented the state’s continued failure to effectively integrate the informal sector into the tax net, stating that more than 80% of Ghana’s economy remains untaxed, putting undue pressure on the formal sector.

“All we do is tax the 20 per cent in the formal economy. Why should we focus so much on the 20 per cent and overtax them, and leave the 80 per cent?” he queried.

He called for an urgent review of the VAT system and advocated broader stakeholder engagement to bring informal businesses under a more equitable tax regime. Without such reforms, he warned, Ghana’s revenue mobilisation efforts would continue to fall short, increasing the country’s reliance on borrowing.

“We need to look at this critically. Otherwise, we would not be making a lot of inroads in terms of tax revenue mobilisation, and that is why we keep borrowing. Because we are not raising enough revenue,” he said.

Prof Quartey also dismissed the notion that increasing taxes would automatically raise the country’s tax-to-GDP ratio, pointing out that Ghana continues to lag behind its peers on the continent. “Tax to GDP at best is 14 per cent, when some are doing 18, 20, 23 per cent within Africa. So it tells you there is a lot of risk inherent in this approach.”

He concluded that tax compliance could be improved through greater transparency and accountability in the use of public funds. “It’s not just about raising the revenue, but how well you use the revenue to advance your cause,” he said.

The forum, held at the Ecobank Head Office under the theme “A broad review of the economy of Ghana: Then, now, and the way forward”, featured contributions from Presidential Advisor on the Economy, Seth Terkper, and PwC Ghana’s Tax Partner, Abeku Gyan-Quansah. Discussions focused on repositioning Ghana’s economy for long-term growth through prudent fiscal management, innovative taxation strategies and sustainable monetary policy.