A Survey of the Ghanaian Tax System

The work the researchers from the IFS undertake with the team from MoF and GRA falls under broader work being undertaken at the FCDO-funded Centre for Tax Analysis in Developing Countries (TAXDEV). The aim of the Centre is to generate new research, analysis and in-country analytical capacity in the area of tax and benefit policy and administration in DFID-priority countries such as Ghana.

The work undertaken so far includes policy costing work, development of a tax and benefits model GHATAX and a successful pilot digitization of tax administrative data from paper tax returns at the GRA.

As part of the ongoing collaboration, the team has produced a report, “A survey of the Ghanaian tax system” which provides a comprehensive overview of Ghana’s tax system. The report is intended as a repository of key information for researchers, policymakers and the public, as well as highlighting aggregate patterns of note as a first step for identifying challenges and areas for reform.

Some of the key findings in the report include:

• The design of Ghana’s tax system is a crucial issue for policymakers. This is especially true in light of a challenging fiscal outlook, with overall government budget balance reaching –11.7% of GDP for 2020 and spending on compensation of employees and debt repayment exceeding 100% of tax revenue. 

• At 13% in 2019, Ghana’s tax-to-GDP ratio remains far below the government’s target of 20% by 2023. Though this ratio is 5 percentage points higher than in 2000, it has remained at the same level since 2017.
   
• Much of the growth in Ghana’s tax revenues since 2000 has come from increased corporate and personal income tax and VAT and similar taxes, though revenue growth from the latter two has stagnated more recently. These taxes made up over 70% of total collections in 2019 – up from 57% in 2000. 
   
• Tax collections on imported goods have become far less important in the revenue mix, though they remain significant: 30% of overall tax revenues were collected on imported goods in 2019 (including VAT on imported products), compared with 54% in 2000. The contribution of import duties specifically to total tax revenue declined from 18% in 2000 to a low of 12% in 2019. 
   
• Ghana’s tax-to-GDP ratio is fairly typical of countries in sub-Saharan Africa. However, considering countries of a similar income level across the world, Ghana’s tax revenue collections are relatively low: out of 36 lower middle-income countries with available data, Ghana ranked 26th in 2018.
   
• Analysis of tax rates and revenues across countries is suggestive of differences by tax type in relative revenue mobilisation in Ghana. While recent growth in corporate income tax revenues means they exceed those in other countries using similar tax rates, personal income tax and general sales tax revenues are lower than would be expected, all else being equal.

The report is available for download HERE.