Promoting progressive taxation and tax compliance in Ghana

Progressive Tax and Compliance

An ongoing advocacy since 2021 that seeks to increase fiscal space for social spending priorities through more effective, transparent, fairer and gender-responsive revenue collection in the Shama District of Ghana. This advocacy has already produced the “Shama Model” spearheading the transparency and accountability of the Shama District Assembly, a geospatial dashboard that maps social amenities against revenue generation in the district, and a comprehensive and reliable database on properties and businesses across major communities in the district to enhance domestic revenue mobilization. 

Background

As Ghana attained middle-income status in 2010 there has been a major shift in foreign donor attitudes on support for the country as most are moving from aid to trade and subsequent decline in donor support has significantly narrowed the fiscal space for government despite increases in revenues from oil and gas. Attempts at addressing the fiscal constraints has led to the drive to borrow extensively from both the domestic market and externally especially through the issuance of Sovereign Bonds and Chinese mortgaged loans.  

The high appetite for borrowing has resulted in the IMF recently declaring Ghana as High-Risk Debt Distress Country. The government’s adoption of debt profiling and rescheduling has even greater implication for plunging the country into debt trap as the country currently spends over 42% of every 1 Ghanaian cedi revenue collected to service debts. This has put further strain on the country’s finances, and many of the country’s economic and development indicators still reflect the status of a low-income country, especially tax revenue.  

The country’s tax to GDP ratio in 2018 and 2019 were 12.9%, and 13% respectively. These are also below the average of 18- 20%¹  for middle-income countries. In the context of dwindling foreign aid, continued reliance on external borrowing to finance development projects, increasing debt repayments and ambitious party manifesto promises, the imperative to improve domestic revenue mobilization (DRM) has become stark. But how government chooses to raise revenue (i.e. who pays) is equally important.  

This poor revenue performance is the result of a low tax base/net, tax exemptions and holidays which the IMF says cost Ghana $1 billion a year and are largely unjustified, Illicit Financial Flows, corruption, administrative inefficiencies, and low application of relevant technology among others.  https://www.youtube.com/watch?v=gQlCacE6pVU  

Building on engagements with government, Oxfam and its partner Friends of the Nation is using these opportunities to increase fiscal space for social spending priorities through more effective, transparent, fairer, and gender-responsive revenue collection.