Today in History: Formal sector workers pay 16 times more in taxes - Tax expert

Tax Expert, Abeku Gyan Quansah, on May 25, 2020 averred that the informal sector in Ghana contributes the lowest taxes.

According to him, even though 70% of the country’s economy is made up of the informal sector, the tax burden has been shifted to formal sector workers.

Mr Quansah said the formal sector workers pay 16 times more in taxes.

Read the full story originally published on May 25, 2020 by www.ghanaweb.com.

A Tax Partner at PwC Ghana, Abeku Gyan Quansah, has disclosed that the informal sector in Ghana contributes the lowest taxes.

He noted that even though 70% of the country’s economy is made up of the informal sector, the tax burden has been shifted to formal sector workers.

Speaking during a public lecture by the Institute of Chartered Accountants Ghana, he said, “If you do a comparative analysis and you compare it to the other statistics that are made available out there, a lot of work ought to be done in roping in the informal sector. For 2021 for example, the amount of taxes that were paid as pay as you earn (PAYE) compared to the informal sector was 16 times higher.”

He laments that “so, on average, when you pick somebody in the formal sector, that person pays 16 times more than someone in the informal sector.”

The tax expert noted that even though government had announced plans to rope in the informal sector the ratio is still very high..

Speaking on the theme: ‘Roping in the informal sector in Ghana’s tax net’, Quansah said the country’s current tax regime is too complicated reason government is finding it difficult to rope in the informal sector.

“They are saying they don’t have a good relationship with our tax administration; they complaining that there is difficulty in calculating and filing and paying their taxes. You are asking the guy in Makola Market to do an initial assessment, do a revision, withhold tax, and pay it. He won’t even mind you because he doesn’t even understand all that,” he pointed out.

He noted that it is time the GRA enforces tax laws in the country.

“If you do a count of the tax laws that are administered by the Ghana Revenue Authority (GRA), you will get more than 27 laws.

“Should we continue in this stead, what is the whole idea of having the value added tax (VAT) and the allied levies of health, education and COVID-19?”

“What did we really seek to achieve by doing that? All these add to the complications.

“All these add to why the informal sector is unable to come into the tax net, according to a report by the International Federation of Accountants (IFAC),” he stated.