Graphic Business News

‘Adopt indexation to rope in informal sector into tax net’

By: Kester Korankye
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A Partner at the PwC Ghana, Mr Abeku Gyan-Quansah, has proposed the introduction of indexation as a way to rope in the informal sector into the tax system.

He said that annually, there should be an increase in the price of goods on shelves by about 12 per cent because as a country, it had been difficult taxing the informal sector.

Mr Gyan-Quansah made the proposal when he outlined some innovations to increase Ghana’s tax revenue during the ???maiden edition??? of the GRAPHIC BUSINESS / STANBIC BANK breakfast meeting series in Accra on February 19, 2020.

He noted the informal sector arguably controlled a large chunk of the country’s Gross Domestic Product (GDP), but their contribution to tax was heartbreaking.

“The 2020 budget, if you compare the tax rates employees in the formal sector pay to what is generated from the informal sector, everyone in the formal sector contributes between 15 to 17 times of the equivalent person in the informal sector. 

"You can take a very complex thing and make it very simple and that is what we should do to the tax system. We should get to the point where we can make taxation simple enough to be grasped by the ordinary Ghanaian.

"You can take a very complex thing and make it very simple and that is what we should do to the tax system. We should get to the point where we can make taxation simple enough to be grasped by the ordinary Ghanaian."

Tax conflicts
He noted that a lot of government revenues were locked up in disputes and which government in 2018 promised to use Alternative Dispute Resolution (ADR) mechanism to settle tax disputes.

However, he said two years down the line, that promise was yet to materialise.

He said it was important to do away with unduly complicated tax laws for the informal sector. 

The Vice-President of policy think tank, IMANI Africa, Mr Kofi Bentil, reiterated the importance of making the tax system in the country very simplified and effective, explaining that the tax system was too convoluted.

“You can take a very complex thing and make it very simple and that is what we should do to the tax system. We should get to the point where we can make taxation simple enough to be grasped by the ordinary Ghanaian,” he said. 

The breakfast meeting
An initiative of the Graphic Communications Group Limited (GCGL) and the Stanbic Bank Ghana Limited, the quarterly breakfast meeting brings together experts, captains of industry, economists, policy makers to discuss issues of national concern.

The first one for the year was to discuss how the country could address its revenue and expenditure imbalances.

It was on the theme: “Breathing new lease of life into the economy - Fixing the revenue/expenditure conundrum”.