The Ministry of Finance, members of parliament and the Ghana Revenue Authority (GRA) have all made commitments to improve the tax system, and help address poverty and inequality issues in Ghana.

Following a tax system research presentation held by SEND GHANA in Accra on June 4, the Ministry of Finance pledged to include informal sector employees, such as hairdressers, shoemakers and taxi drivers, in the pre-budget tax process. “We will be involving the artisans and people at the lower level in our pre-budget tax programmes,” said Kukua Williams, head of tax policy at the ministry.

Okoe Boye, Member of Parliament for Ledzokuku, added to the issues raised by SEND, saying mechanisms must be developed to make filing taxes simple and rewarding.

“Appealing to people’s conscience to pay tax has its limits,” said Boye. “What we must do is develop simple tools and include reward mechanisms to ensure citizens pay their taxes.

“Filing tax must also be made easy,” he added. “I didn’t find it easy filing my tax returns.”

Other members of parliament urged SEND to work closely with them so that tax recommendations can be realized by way of legislative instruments.

Mahama Ayariga, MP for Bawku Central, called on SEND to develop a policy brief on issues and recommendations raised during the presentation.  “Make the issues and discussions a policy brief document for parliamentarians to help influence the work we do in parliament,” said Ayariga. “For effective advocacy on these issues, stay in touch with parliamentarians and directly get the messages to the MPs to have the information included in the legislative instruments.”

Marfo Nana Amanianpong, chairman of the Parliamentary Select Committee on Trade and Industry, also asked SEND to develop a policy brief for parliamentarians. “We are waiting for a policy brief of your research findings and the issues that have been discussed here to help us make informed inputs on the floor of parliament,” he said.

SEND is currently in the process of completing a policy brief, and plans to share it with parliamentarians this month.

Representatives of the GRA pledged to review issues and recommendations that emerged during the discussion. According to Ag. Deputy Commissioner Nathan Nettey, the GRA is “already in the process of simplifying the tax filing and registration forms, and (has) taken note of the issues of introducing a reward mechanism as a strategy to encourage people to pay taxes.”

Background

With funding from STAR GHANA, DANIDA and UK AID, SEND GHANA conducted a study on the tax system in Ghana with the objectives of:

• examining how the prevailing tax system affects the cost of living of people, especially the marginalised and socially excluded;
• examining the fairness of the existing tax system and its implications on inequality; and
• exploring the practical ways of promoting a progressive tax system in a country that is largely driven by the informal sector as a means of achieving inclusive development of all.

The findings of the study show the following:

• 75 percent of respondents recognise the need for every citizen, regardless of their economic status, to contribute to the developmental agenda of the country through the payment of taxes.
• 7 out of 10 respondents strongly believe their living standards, to a large extent, are worsened by the amount of taxes they pay on goods and services, and generally view the existing tax system to be unfair to the poor and marginalised.
• The study also revealed low involvement of vulnerable and socially excluded groups in tax formulation and administration, incentivising low citizen compliance in tax payment.
• While the direct form of taxation in Ghana is believed to be progressive in nature and by implication sensitive to the plight of the poor, its impact on the poor is very minimal given that a large proportion of Ghanaians are employed in the informal sector and hence are usually not affected by direct taxes. The poor are, therefore, affected more by the indirect tax system, which is not based on an individual’s earning capacity but rather on consumption.