Prof. Peter Quartey, the Director of the Institute for Statistical, Social and Economic Research (ISSER), has highlighted the flaws in Ghana’s tax system, stating that it encourages tax evasion and benefits only a few individuals. He pointed out that the imposition of high taxes on businesses and individuals in an attempt to meet revenue targets has led to a situation where tax evasion is rampant.
Speaking at the Graphic Ecobank Economic Forum, Prof. Quartey emphasized the need for tax policies to focus on behavioral correction and effective revenue collection, rather than just meeting targets. He singled out Ghana’s VAT system as a prime example of how high tax rates are burdening businesses and consumers, leading to tax evasion.
The professor noted that Ghana’s VAT rate of 21% is higher than that of its competitors, which range from 15% to 18%. This disparity, he argued, incentivizes tax evasion and fosters corruption between tax officials and businesses. He also pointed out that Ghana’s informal economy, which accounts for over 80% of economic activity, makes it difficult to track and punish tax evaders, further exacerbating the problem.
Prof. Quartey suggested that the VAT system needs to be reevaluated, and efforts should be made to bring the informal sector into the tax net. He warned against simply increasing taxes without a corresponding increase in tax-to-GDP ratio, as this could lead to more borrowing and financial risks for the country.
To encourage voluntary tax compliance, the professor recommended using tax revenue efficiently for the public good. He stressed the importance of not only raising revenue but also utilizing it effectively to advance national development goals.
In conclusion, Prof. Quartey’s insights shed light on the challenges facing Ghana’s tax system and the need for comprehensive reforms to promote transparency, fairness, and compliance. By addressing these issues, Ghana can enhance revenue mobilization and achieve sustainable economic growth.
