The Ghana Revenue Authority (GRA) has announced that it is nearing the completion of processes to bring approximately two million potential informal sector taxpayers into the tax system.
At a media briefing in Accra, Mr. Edward Gyambrah, Commissioner of the Domestic Tax Revenue Division of the GRA, stated that advanced plans are in place to launch the Modified Taxation System, aiming to incorporate about two million small and medium taxpayers from the informal sector.
“This system will capture everyone who earns income in the country, and we envision roping-in about two million before end of year. We’ve been working on it over the last three months and its roll-out is scheduled for August this year,” he said.
The informal sector is often elusive in tax mobilization, with tax evasion and avoidance being widespread.
Despite the rapid growth of the informal economy, GRA data indicate a consistent decline in tax collection from this sector in recent years.
For example, the Vehicle Income Tax, a major contributor from the informal sector, decreased from 8.3 percent in 2017 to 7.3 percent in 2020; similarly, the Tax Stamp contribution fell from 1.4 percent to 1.3 percent over the same period.
Tax experts find this decline alarming, given that the informal sector makes up more than 85 percent of the national workforce.
Good Governance Africa estimates that Ghana’s informal sector accounts for about 35.6 percent of the economy, roughly equivalent to US$66 billion at GDP purchasing power parity.
Discussing the sector’s potential, Mr. Gyambrah mentioned that the Modified Taxation System will aid the GRA in expanding the current tax base.
In fact, the GRA has surpassed its target by registering over 600 taxpayers in the Large Taxpayer Office into the Commissioner-General’s invoicing system.
Mr. Gyambrah noted that the Authority has onboarded 614 taxpayers so far and is prepared to implement additional key strategies, including the Modified Taxation System.
“These are key strategies that will be replicated in implementing the modified system to increase collection and enable us to meet the GH¢146billion tax target for the 2024 revenue year,” he said.