Ghana’s tax/GDP (rebased) ratio currently sits below 13%. Not only is the country’s tax revenue as a share of GDP low in absolute terms, but it is also very low as a share of GDP relative to those of its African peers, pointing to the need to significantly increase tax revenue.
Developing mechanisms to improve tax revenue has, however, become challenging on at least two fronts: (i) lack of good data on tax compliance; and (ii) difficulty in finding effective instruments for improving compliance, given the institutional constraints.
One way to raise more tax revenue, therefore, is to improve the effectiveness of the tax administration system. Another important way is to improve tax compliance. This means strengthening the capacity and resources needed for better taxpayers’ services and enforcement, reviewing tax structures, and investing in skills and management systems needed to establish a productive tax system.
This fiscal alert makes recommendations on how to improve revenue mobilization in Ghana through tax compliance.