Ghana’s Tax System Faces Urgent Reform to Boost Revenue and Sustainable Growth

Ghana’s tax system, long criticized for inefficiency, remains a significant barrier to the country’s development.

Despite some efforts to reform the system, progress has been slow, and the country continues to struggle to generate the revenue needed to drive national growth.

The next government faces the critical challenge of implementing substantial changes that will broaden the tax base, make the system more equitable, and increase overall revenue.

One of the key issues is the narrow tax net. Formal sector workers, including teachers, nurses, and civil servants, bear a disproportionate tax burden, while many in the informal sector—such as traders, masons, and hairdressers—escape taxation altogether. This imbalance is evident when comparing the tax burden of a teacher earning GHS2,500 a month to that of a mason earning GHS10,000 a week, who often pays little to no tax. The system fails to track informal sector incomes effectively, largely due to weak enforcement, widespread mistrust, and a lack of mechanisms to ensure that all workers contribute fairly.

Beyond the individual challenges, Ghana’s tax system is plagued by systemic inefficiencies, including widespread corruption, tax evasion, and outdated administrative procedures. While there have been discussions about digitalizing the tax process, the implementation of these reforms has been slow. Consequently, Ghana remains overly reliant on foreign loans, which only deepen the country’s financial strain. The 2022 IMF bailout, for example, imposed severe conditions that further exacerbated living conditions for ordinary citizens. To break free from this cycle of dependency, Ghana must look inward and focus on increasing domestic revenue generation.

One of the most promising avenues for boosting revenue lies in the country’s tourism sector, which already contributes around $2 billion annually. With the right investments and strategic marketing, Ghana could double this figure. Other countries, such as the UK, South Africa, Kenya, Morocco, and Rwanda, have successfully harnessed the power of their natural and cultural assets to generate billions of dollars in tourism revenue. Ghana can follow this model by expanding its “Detty December” programs, which attract African Americans, Britons, and Europeans. If Ghana were to diversify its events beyond Accra, improve infrastructure, and partner with airlines for discounted travel packages, the country could see significant growth in tourism revenue.

Furthermore, Ghana’s historical landmarks, such as Cape Coast Castle, could be enhanced with virtual tours and other digital experiences to appeal to a global audience. Promoting eco-tourism, tapping into the African diaspora, and improving marketing strategies could lead to a significant increase in the sector’s earnings. Experts believe that tourism revenue could soar to over $4 billion annually, providing thousands of jobs and boosting local economies.

Ghana also has abundant natural resources—gold, oil, and cocoa—that remain underexploited. The country’s current contracts with multinational corporations often fail to ensure that Ghana benefits fully from its resources. For instance, processing cocoa locally into chocolate rather than exporting raw beans would generate far more value and revenue for the country. Although these opportunities are well known, the pace of implementation has been slow.

An underutilized tool to expand the tax base is the Ghana Card, which could be linked to tax records for easier tracking of both formal and informal sector workers. To improve compliance, the government could simplify tax systems for small businesses and self-employed individuals while offering benefits such as access to loans or health insurance. Additionally, adopting digital systems to reduce corruption and improve transparency in the tax collection process is essential for modernizing the system.

To rebuild trust in the tax system, citizens need to see tangible benefits from their tax payments in the form of better public infrastructure, such as improved roads, schools, and hospitals. Demonstrating visible results will encourage compliance and foster a greater sense of civic responsibility. It is also crucial that the government holds both large corporations and small traders equally accountable for their tax contributions, ensuring that the burden is shared fairly across society.

Ultimately, fixing Ghana’s tax system will require strong and decisive leadership. The government must take bold steps to expand the tax net, improve transparency, and educate the public about the importance of paying taxes. If these reforms are implemented effectively, Ghana can generate the revenue needed to drive sustainable growth and reduce its reliance on foreign loans.

As the country looks toward the future, there is an undeniable opportunity to transform its tax system and unlock the full potential of its tourism sector. With the right leadership and commitment, Ghana can chart a path toward economic independence and sustainable development. The time for action is now.