The era where Ghana’s formal sector shouldered the tax burden of the informal sector is over according to Finance Minister

Ghana’s Finance Minister Ken Ofori-Atta has said that the formal sector can no longer bear the tax burden of the informal sector.

Ken Ofori Atta

He, therefore, said that the government considering reforms to broaden the tax base.

Speaking at the Danquah Institute’s Economic Forum on Friday, the Finance Minister said the Ghana Revenue Authority (GRA) has over the years neglected the informal sector in revenue mobilization causing the formal sector to be over-burdened.

Mr Ofori-Atta said some drastic measures will be put in place to ensure the informal sector is properly captured in the tax base especially as government’s domestic revenue continue to underperform.

“For far too long, we have ignored the importance of a broad tax base for Ghana’s development. We have neglected the informal sector in our attempts at boosting domestic revenue mobilization. Governments in the past accepted that mobilizing taxes from the informal sector was difficult and very expensive.”

“This clearly calls for a rethink on how government extracts tax revenue from the informal sector. The obvious truth is that our formal sector can no longer keep carrying the burden of the informal sector. But, the trouble is in our own understanding of what constitutes the “informal” sector,” he added.

He also stated that often the definition of the informal sector is oversimplified to mean petty traders.

“But, really, as far as the taxman is concerned, wearing a suit and having a business card is not the stuff that qualifies you as being part of the formal sector. It is how you live up to your tax obligations,” he added.

He stated that although there has been a marked improvement in SSNIT contributions from GH¢280 million in 2016 to GH¢486 million in 2019, there is more room for improvement regarding enrolment and contributions.

“There are many lawyers out there, accountants, respectable consultants, PhD holders, big businessmen, who simply refuse to declare their incomes. They have the resources and knowledge to make their fair contribution but simply refuse to pay their taxes and yet will shout the loudest on social media and any given forum about how Government is failing in delivering public services. Such men and women are all around us, unfortunately,” he said.

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