Ghana tax highlights in 2024

William O. Appiah, Chartered Accountant, London, UK
September 3rd, 2024

On May 17th, 2023, the International Monetary Fund (IMF) approved US$3 billion Extended Facility Agreement (ECF) for Ghana. The ECF aims to restore macroeconomic stability and debt sustainability and economic growth. It contains a package of reforms that will put the country back on the road to economic growth. Under the ECF, the government of Ghana committed to raising revenues. The goal is to close the fiscal deficit and repay the debt. In 2024, the government forecasts revenues of US$14.6 billion (GH₵176.4 billion), which is equivalent to 16.8 percent of GDP. This includes US$1.24 billion (GH₵15.0 billion) revenues from oil and gas or 1.4 percent of GDP. The government has launched an ambitious structural reforms in the areas of tax policy, revenue administration, and public financial management. The goal is to expand the tax net by targeting under-exploited taxes (property tax, excises) to increase the tax-to-GDP ratio and bring back fiscal consolidation.

Taxable demographics

Structural issues continue to constrain tax efficiency and limit the mobilization of revenues. The first limitation is the size of the taxable population. Ghana has a population of 33.48 million¹. The adult population (18 years or older) makes up 58.2 percent, while 42.8 percent are below 18 years.

During the presentation of the 2022 national budget to the parliament on November 17th, 2021, the Minister of Finance, Ken Ofori-Atta, revealed that only 2,364,348 persons are tax payers². This represents less than 10 percent of the total population. In the working population, only 1,643,839 individuals (Five percent of the total population) contribute to the Tier 1 official state pension system (SSNIT) and 2,107,322 (less than 10 percent of the total population) to Tier 2.

The private sector shows similar discrepancies. The data base of the Ghana Revenue Authorities (GRA) shows 45,109 entities registered as corporate taxpayers and 54,364 persons registered as self-employed taxpayers. This represents only 35 percent of the total number of companies in the database of the Registrar-General’s Department. In August 2021, the Registrar’s database had 136,198 registered entities, in which self-employed represented 80 percent of entities.

Between 2019 and 2022, the GRA recorded a modest growth of the taxable population, with self-employed taxpayers registering the highest at 15.97 percent. But the number of corporate taxpayers has stagnated. In 2022, the GRA set a revenue growth target of 28.2 percent in order to achieve a tax-to-GDP target of 17.5 percent. The agency recorded another modest progress in 2023, but at the end of the first quarter of 2024, it had not its own target.

Diversifying tax sources

According to the IMF, ‟Ghana’s fiscal problems are rooted in structurally weak domestic revenue”³. The government admits that in revenue collection, Ghana is behind other middle-income countries. Ghanaian authorities decry the situation, have promised to simplify the tax process and continue to appeal to its citizens for an active participation in reforms. The government says that it wants to ensure that Ghanaians, both in the informal and formal sectors, pay tax. A simplidified representatio of data from the GRA shows 25 taxes, under four major categories or heads, which together generate the largest share of tax revenues. This table does not show sub-taxes, local taxes, reliefs and exemptions.

The GRA has developed a plan covering the period 2023-2025, which targets an untapped taxable population of 10 million. The GRA uses the new database from the national biometric identity system to identify this pool of taxpayers. This new system allocates Taxpayer Identification Number or Ghana Unique Identification Number (TIN/GUIN) to potential tax payers.

Ghana’s tax structure relies on direct, indirect and trade taxes. The three components generate over 95 percent of tax revenues. In 2023, the Organization for Economic Cooperation and Development (OECD) noted that value added tax (VAT) contributed the highest share of tax revenues in Ghana with 29 percent, followed by taxes on goods and services other than VAT with 27 percent (based on 2021 data)⁴. The 2022 annual report of the Ghana Revenue Authorities and the budget statement for the 2023 budget shed more light on how the goverment raises revenues from taxes.

A ‟narrow tax”⁵ base and a finite number of instruments contribute to the stagnation of the tax to GDP ratio. The country’s tax ratio relative to the gross domestic product (GDP) even declined despite the rebasing of the economy in 2010 and 2013. This decline highlighted gaps in tax efforts and tax yield. According to the GRA, the 2010 rebasing led to a 60 percent expansion of the economy but with a significant drop in the tax-to-GDP ratio. Similarly, the rebasing of 2013 expanded the economy by 16 percent. But in 2019 the tax-to-GDP ratio declined by 13.9 percent⁶.

Multilateral and bilateral lenders and donors continue to highlight the country’s tax problems. According to the World Bank, Ghana’s tax-to-GDP ratio compares unfavorably to the averages for regional peers, emerging markets, and Sub-Saharan Africa (SSA)[ii]. Tax is central to the 2023 IMF’s ECF reform program. In discussions with the IMF, the government has reiterated its goal to raise the public revenue-to-GDP to over 18.5 percent by the year 2026 (from 15.7 percent in 2022) and increase the tax ratio.

Banking on reforms

In the ECF, the IMF, and the government of Ghana agree on the need for ‟ambitious structural reforms in the areas of tax policy, revenue administration, and public financial management”⁸. In the field, the GRA is deploying a digital platform to facilitate domestic tax revenue processes. Other measures include the introduction of cashless transactions to allow taxpayers to use mobile and online payments. Tax payers also have the option to pay into designated government bank accounts. Finally, the GRA will allow entities, corporations, and individuals to file returns in the comfort of their offices and homes.

In 2023, a tax diagnostic mission identified key measures to boost revenue. The mission also revealed efficiency and equity concerns. It recommended the removal of VAT exemptions (which consume 2 percent of GDP every year). A second recommendation concerns the restructuring of the corporate income tax (CIT) to phasing out tax holidays and exemptions. Finally, the mission suggested the introduction of safeguards against profit shifting.

Three other measures complement corporate tax reforms. They are progressive personal income taxes, the indexation of exchange rate movement or inflation and the adoption of a new fiscal regime for the extractive industries. Ghana has the backing of the African Development Bank Group. On August 18th, 2021, the pan-African bank and the Ministry of Finance in Ghana launched a US$7.4 million project to strengthen domestic revenue mobilization.

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