Tax compliance in Ghana has long been a pressing issue, with the government struggling to ensure that all citizens contribute their fair share. According to the Institute of Fiscal Studies and the Ministry of Finance, as of August 2024, Ghana’s total tax-to-GDP ratio remains below 18%. The burden falls disproportionately on a small segment of the population, while widespread tax evasion and non-compliance result in significant revenue losses each year.
A major challenge is Ghana’s economic structure where the informal sector far outnumbers the formal PAYE taxpayer base. Traditional enforcement methods have proven ineffective in integrating informal sector workers into the tax system. The past NPP government attempted several initiatives, including leveraging Ghana Card data to track earnings, offering tax amnesty programs, and introducing a mobile self-assessment app which required a flat tax rate payment. However, these measures have largely failed due to the absence of effective enforcement and monitoring mechanisms, particularly for self-employed individuals.
To address this, the government must adopt a strategy that either mandates compliance or provides strong incentives for voluntary participation. One of the most effective ways to achieve this is by leveraging Ghana’s most popular social intervention program, The Free Senior High School policy (Free SHS). With over 3.5 million students benefiting from this initiative, many of whom’s parents are self-employed individuals who may have never submitted tax returns or contributed to the national tax system.
A powerful solution would be to link the Free SHS benefits to tax compliance. By making Free SHS a means-tested program, parents would be required to submit annual tax returns whether or not they have taxable income to remain eligible. This approach would create a direct incentive for informal sector workers to engage with the tax system. Additionally, all government services should mandate tax assessment statements for self-employed individuals, further embedding compliance into everyday life.
Beyond improving tax compliance, this initiative would have other significant advantages. The government would gain better insight into household financial standings, allowing for more targeted social interventions. It would become easier to distinguish between families in genuine need of support and those capable of contributing to school fees, making future cost-sharing policies more feasible. Moreover, it would help identify illegal foreign nationals who currently benefit from the Free SHS policy without paying fees or contributing taxes, ensuring they are excluded or pay their fair share.
Ultimately, Ghana must find innovative ways to expand its tax base, reduce fiscal pressure on a small group of taxpayers, and create a more equitable system. If more people contribute, the government could lower tax rates while maintaining revenue levels, benefiting both individuals and businesses. Without proactive measures like linking the Free SHS and other government services to tax compliance, the burden will continue to fall on a few, perpetuating the cycle of high taxes and limited development.
The time for action is now. By implementing policies that encourage universal tax participation, Ghana can build a fairer, stronger, and more self-sufficient economy. Let’s ensure that everyone contributes their fair share for the nation’s growth and prosperity.
Written by: David Aikins-Bekoe
Good governance and policy advocate [email protected]
