Professor Peter Quartey, the Director of the Institute for Statistical, Social and Economic Research (ISSER), has expressed concern regarding Ghana’s current tax regime, asserting that it promotes evasion and serves only a select few individuals.
During his address at the Graphic Ecobank Economic Forum, Professor Quartey attributed this issue to the imposition of high taxes on both individuals and businesses as part of the government's efforts to achieve revenue targets.
He cautioned that tax policy should extend beyond merely meeting targets; it should also aim to influence behavior and facilitate efficient revenue collection.
"In my opinion, our tax levels are excessively high. Our VAT exceeds 21%. There are also certain levies that do not allow for input tax claims. In contrast, our competitors pay rates of 15% or 18%, while we impose rates over 21%. This approach encourages tax evasion," he remarked.
Professor Quartey identified the structure of Ghana’s VAT system as a significant factor contributing to the burden faced by businesses and consumers, highlighting that it complicates compliance and incentivizes avoidance.
He expressed concern that elevated tax rates have resulted in collusion between businesses and tax officials, thereby undermining efforts to mobilize national revenue.
"When taxes are excessively high, it leads to tax evasion. Consequently, customs officials and some businessmen benefit financially, while the government struggles to secure adequate funding," he lamented.
Professor Quartey also pointed out the challenges associated with taxing Ghana’s predominantly informal economy, which accounts for over 80% of the country's economic activity.
"We have yet to establish a proper mechanism for taxing the informal sector. Our focus remains largely on the 20% within the formal sector. Why should we impose excessive taxes on them while neglecting the 80%?" he queried.
He recommended a thorough review of the VAT system, along with broader stakeholder engagement aimed at integrating the informal sector into the tax framework.
"We must critically examine this situation; otherwise, we will not make substantial progress in mobilizing tax revenue. This is the reason we continue to rely on borrowing—because we are not generating sufficient revenue," he emphasized.
Furthermore, he warned that simply increasing taxes does not guarantee an improved tax-to-GDP ratio, noting that Ghana's current rate stands at approximately 14%, whereas other African nations achieve rates as high as 23%.
In conclusion, Professor Quartey underscored the necessity of transparency and the effective utilization of tax revenue to foster public trust and enhance voluntary compliance.
"It is not solely about increasing revenue; it is also about how effectively it is utilized to promote the public's wellbeing," he remarked.