Develop tax policies to target informal sector - Experts urge government

An economist at the Economics Department of the University of Ghana, Prof. Eric Osei-Assibey has bemoaned the government’s inability to formulate policies that will shore up tax revenue from the informal sector.

Prof. Osei-Assibey speaking at the Pwc post-budget forum said it is disappointing that while the informal sector is acclaimed as the largest contributor to the country’s GDP, its tax contribution is nothing to write home about.

“I was expecting government would come up with perhaps more straightforward or targeted tax policies towards the informal sector particularly the issue about widening tax net rope in informal players.

…with the advent of technology and mobile money platforms currently being deployed, I think it provides enormous opportunities for government to really target that sector as much as possible for them to contribute to the tax net we are looking at,” he said.

According to the budget statement, the government is targeting raising more than GH¢70bn in revenues with direct taxes expected to amount to GH¢29.93 billion to be generated in 2021, representing a growth of approximately 27% over the 2020 provisional performance.

Speaking at the forum, Abeku Gyan-Quansah, a Tax Partner at Pwc said the informal sector’s tax contribution is woefully inadequate. He explained that the sector’s contribution is nearly 1/15th of what is paid by the formal sector via direct taxes.

While the government has set its sights on increasing the tax-to-GDP ratio to about 20 percent in the short-term, Mr. Gyan-Quansah argued that specific policies must be outlined to cater to the informal sector.