- 5 Marks
Question
Countries, including Ghana, have embarked on various tax reforms geared towards improving tax revenue to help provide infrastructure and guarantee sustainable growth. Tax administration in Ghana has therefore seen a number of reforms over the years, including restoring the tax base, improving tax administration, and the integration of the Revenue Agencies into an Authority to act as a one-stop shop as per the Ghana Revenue Authority Act, 2009 (Act 791).
Required:
In reference to the statement above, analyze TWO challenges (key issues) on tax reforms in Ghana.
Answer
Challenges in Tax Reforms in Ghana
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Weak Tax Compliance and Enforcement
- Many businesses and individuals fail to comply fully with tax regulations, leading to high levels of tax evasion and underreporting.
- The informal sector, which constitutes a large portion of Ghana’s economy, remains difficult to tax due to poor record-keeping and cash-based transactions.
- Weak enforcement mechanisms and inefficient penalties discourage voluntary compliance.
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Narrow Tax Base and Revenue Mobilization Issues
- Ghana’s tax base is limited, with heavy reliance on corporate income tax, import duties, and a small segment of registered taxpayers.
- The informal sector contributes minimally to tax revenues, despite its significant share in economic activities.
- There is excessive dependence on a few industries, such as mining and telecommunications, making tax revenue vulnerable to external shocks.
- Topic: Tax administration in Ghana
- Series: Nov 2024
- Uploader: Salamat Hamid