Ghana's informal sector generates about 80% of all economic activity in Accra. This significant finding comes from Jennifer Moffat, Country Director of BudgIT Ghana. She emphasized the urgent need for Ghana to develop better systems to identify and tax these informal earners.
Moffat, speaking on Asaase Radio's Townhall Talk on August 28, highlighted the vast size of this untaxed economy. She argued that the informal sector extends far beyond traditional market traders. It now includes professionals like consultants, lawyers, doctors, and content creators. These individuals earn substantial income from various side jobs and services.
This high informal economic activity poses a significant challenge to Ghana's public finances. The government consistently seeks to broaden its tax base and increase domestic revenue. A large, untaxed informal sector means the Ghana Revenue Authority (GRA) misses out on substantial potential income. This impacts the government's ability to fund essential public services and infrastructure projects. The International Monetary Fund (IMF) has also consistently urged Ghana to improve its tax collection efficiency.
BudgIT Ghana, in partnership with the University of Ghana Business School, conducted research into informal-sector taxation in Accra. This study, funded by the International Budget Partnership, examined three main areas. These included manufacturing and services, retail, and other related informal economic activities. Moffat stated that the percentage of informal sector activity is indeed around 80%.
Moffat challenged the idea that informal businesses are too difficult to locate for taxation. She pointed out that many informal workers are visible within their communities. She specifically mentioned masons, tilers, and carpenters. These skilled workers are easily identifiable in construction projects across the city. The real challenge, she noted, is creating systems for the GRA to effectively collect taxes from them.
She stressed that informal sector taxation should not solely target market traders. The sector's evolution means it now encompasses a wider range of income-generating activities. Construction, for example, is a major area where significant informal income is earned but often escapes taxation. This broad scope requires a more comprehensive approach from tax authorities.
Moffat suggested closer cooperation between the GRA and local government authorities. She proposed using building permits as a way to identify contractors and workers involved in construction. This strategy could bring more informal construction workers into the tax net. However, she acknowledged that such a system would require adequate manpower and infrastructure to implement effectively.
Furthermore, Moffat recommended that Ghana make better use of the GRA's Modified Taxation Scheme. This scheme aims to bring more informal sector earners into the formal tax system. She also urged citizens earning income from side jobs and other informal activities to recognize their tax obligations. Contributing to national development through taxes is a civic duty, she emphasized. Improving tax collection from the informal sector is crucial for Ghana's economic stability and growth. It ensures a fairer distribution of the tax burden across all income earners.