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Finance Minister nominee, Dr. Cassiel Ato Forson, has announced the government’s goal to significantly increase tax revenue, raising its contribution to Ghana’s Gross Domestic Product (GDP) from the current 13.8% to 18% in the medium term.
During his vetting in Parliament on January 13, 2025, Dr. Forson emphasized the untapped potential in tax revenue mobilization, asserting that enhanced compliance and system efficiency—not additional taxes—are key to achieving this target.
“We do not necessarily have to increase taxes to generate revenue; there is a need to improve compliance and address inefficiencies in the tax system,” Dr. Forson remarked.
An Aspirational Yet Realistic Vision
While recognizing the ambition of achieving a 20% tax-to-GDP ratio by 2027, Dr. Forson described the target as overly optimistic given current economic challenges. Instead, he envisions a gradual increase to 16-18% in the medium term, aligning with international benchmarks.
Recent studies, including the 2024 Survey of the Ghanaian Tax System conducted by the Ministry of Finance in collaboration with the UK’s Institute for Fiscal Studies, revealed mixed progress in tax revenue mobilization. Despite a six-percentage-point improvement in the tax-to-GDP ratio since 2000, the metric has shown limited gains since 2017 and remains below the global average for countries with comparable income levels.
Revenue Composition and Shifts
Ghana’s domestic tax revenue growth since 2000 has been primarily driven by corporate income tax, personal income tax, and value-added tax (VAT). Together, these accounted for nearly 70% of total tax collections in 2022, a significant rise from 57% in 2000.
However, revenues from personal income tax and VAT have stagnated in recent years. The contribution of international trade taxes has also declined, with import duties making up just 13% of total tax revenue in 2022, compared to 18% in 2000.
Strategic Reforms to Boost Compliance
Dr. Forson highlighted plans to collaborate with the Ghana Revenue Authority (GRA) and the Ministry of Finance’s Tax Policy Unit to improve tax compliance and enforcement.
“In the medium term, my vision—if approved—is to raise the tax-to-GDP ratio to between 16% and 18%, bringing us closer to the standards of our peers,” he stated.
Additionally, the nominee pledged to eliminate what he described as “nuisance taxes,” such as the betting tax, which generates minimal revenue—less than GH¢50 million annually—while causing widespread public dissatisfaction.
Medium-Term Revenue Strategy
The government’s Medium-Term Revenue Strategy (MTRS) for 2024-2027 outlines a roadmap for achieving an 18-20% tax-to-GDP ratio, supported by comprehensive revenue reforms to increase productivity, broaden the tax base, and ensure equitable tax distribution.
These reforms align with the 2023 Ghana National Revenue Policy (GNRP), which also aims to achieve a 4% non-tax-to-GDP ratio and a revenue-to-GDP ratio of 18.7% by 2027.
Addressing Tax Exemptions
Dr. Forson criticized the current tax exemption framework as inequitable and inefficient, noting that it disproportionately benefits specific entities while burdening others.
He cited the One District, One Factory (1D1F) initiative as an example, advocating for legal provisions to ensure transparency and equal opportunities in granting exemptions.
“Taxation must be fair. No individual or company should receive undue privileges at the expense of others,” he asserted.
Commitment to Sustainable Fiscal Management
Dr. Forson expressed confidence that his proposed reforms will enhance public trust in the tax system, improve economic productivity, and lay a solid foundation for sustainable fiscal management. By addressing inefficiencies and enforcing compliance, the government aims to balance revenue mobilization with economic growth, fostering a fair and equitable tax landscape.
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