Tax revenue/GDP ratio likely to drop further to 12.4% in 2020

Ghana is likely to record a further drop in its tax revenue to Gross Domestic Product (GDP) ratio in 2020 to 12.4 percent from the current 13.1 percent in 2019, according to a new econometric analysis conducted by SEND Ghana, a leading public policy think tank. This would be due to faster economic growth than tax revenue growth.

While the projected  drop to 12.4 percent of GDP is woefully below the average ratio of about 22-25 percent for middle income countries, it is instructive to note that Ghana’s tax revenues as a percentage of GDP in 2017 and 2018 hovered around 16.9 and 16.5 respectively. But even as the latest rebasing of Ghana’s GDP ratio increased the fiscal space for further borrowing by lowering the public debt to GDP ratio, it at the same time lowered the tax to GDP ratio to.

This year, the ratio has thus been computed at 13.1 percent.

An assessment of the 2020 budget statement by SEND Ghana, indicates that government’s ambitious flagship programmes could suffer if enough tax measures are not put in place to increase revenue levels.

Meanwhile, there is some indications of reforms at the Ghana Revenue Authority (GRA) which are expected to yield positive results for the country.

But SEND Ghana insists the GRA must be strengthened in all forms both legally and administratively.

It maintains that the development of abridged versions of tax obligation documents by the GRA is commendable as it would help it to interface with the public in a friendlier and customer-focused manner and this could encourage the filing of tax returns.

Albeit, SEND noted that the GRA must also consider a more simplified method of tax relief application processes, to encourage compliance.

An announcement by the Finance Minister to adjust the personal income tax band (the 12 percent in a minimum wage increase for 2020 is tax-exempt) is also regarded by the organization as welcoming news.

It noted this will contribute in no small way to lessen the tax burden on employees, especially those in lower-income brackets.

Besides, the upward review of Personal Reliefs such as marriage relief, child education relief, and old age relief is also seen as a step in the right direction to maximize revenue.

Source: goldstreetbusiness.com