The World Bank has revealed that Ghana’s tax system is leaving a significant amount of revenue on the table due to numerous tax reliefs and exemptions. Between 2015 and 2020, the country missed out on an average of 1.3% of its GDP in corporate tax revenue each year!
Too Many Tax Breaks?
With over two dozen different types of tax breaks for companies, Ghana is losing around 0.5% of its GDP in revenue annually. The World Bank suggests that reducing or eliminating some of these generous tax breaks could improve the tax system and increase corporate tax revenue.
Personal Income Tax: A Low Performer
Personal income tax (PIT) accounts for only 15% of Ghana’s total tax revenues, below the Sub-Saharan Africa average. In 2020, PIT revenue was equivalent to just 2% of GDP, leaving a gap of over 2% between actual and potential revenue.
Payroll Taxes: The Dominant Force
Payroll taxes make up an overwhelming 99% of total PIT proceeds, with other forms of PIT contributing less than 1%. In contrast, countries like India have a more balanced PIT structure.
A Call to Action
Less than 25% of Ghanaians of voting age pay payroll taxes, and less than 0.2% declare business income. It’s time for Ghana to rethink its tax system and tap into its full revenue potential!”
