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The World Bank has raised significant concerns about the impact of tax exemptions on Ghana’s revenue generation. The institution reports that Ghana’s tax system is underperforming due to extensive tax reliefs, which have substantially reduced the corporate income tax (CIT) base.
From 2015 to 2020, Ghana missed out on an estimated 1.3% of its Gross Domestic Product (GDP) annually in potential corporate tax revenue. The World Bank’s 8th Ghana Economic Update reveals that these exemptions result in a loss of approximately 0.5% of GDP in revenue each year.
Also read: Inflation for July drops to 20.9%
Personal income tax (PIT) contributes about 15.0% to Ghana’s total tax revenues, falling short of the Sub-Saharan Africa (SSA) average of 18.0%. As of 2020, Ghana’s PIT revenue was equivalent to only 2.0% of GDP, compared to the SSA average of 3.5%, leaving a gap of more than 2.0% of GDP between actual and potential PIT revenue.
Payroll taxes make up over 99.0% of total PIT proceeds, while other forms of PIT, such as taxes on capital gains, investment income, and business income of the self-employed, account for less than 1.0% of total PIT proceeds—much lower than the over 30.0% observed in some other low- and middle-income countries like India.
In 2022, less than 25% of Ghanaians of voting age paid payroll taxes under the Pay-As-You-Earn (PAYE) scheme, and fewer than 0.2% declared any business income. In contrast, countries with high PIT productivity, such as Norway, Sweden, and Canada, see almost 100% of the voting population filing PIT returns.
