The Ghana Revenue Authority (GRA) is expanding its tax collection efforts by bringing informal sector operators into the tax net. The authority will use a modified taxation scheme to collect revenue from individuals whose business turnover is too small for standard Value Added Tax (VAT) registration.
This initiative targets sole proprietors and small businesses that do not file accounts with the Registrar of Companies. These operators, despite generating income, have historically been outside the formal tax system. The new scheme seeks to ensure they contribute to national revenue.
This move is part of Ghana's broader strategy to enhance domestic revenue mobilization and improve fiscal stability. Data from the Ghana Statistical Service indicates that the informal sector contributes significantly to the national economy, often exceeding 70% of employment. Bringing this sector into the tax framework is crucial for sustainable economic growth and reducing reliance on external financing.
Dr. Dominic Naab, Acting Deputy Commissioner for Strategy and Research and Head of VAT Administration at GRA, explained the approach. He stated that the GRA is not willing to leave these individuals outside the tax system. He also clarified that the modified taxation scheme applies only to individuals and not to registered companies. Registered companies will continue to follow the standard corporate tax framework.
This focus on the informal sector is a direct response to past inefficiencies in revenue collection. Before the GRA's establishment in 2009 under Act 791 of Parliament, Ghana's revenue collection was fragmented. Three separate agencies, including the Internal Revenue Service and the VAT Service, handled different aspects. Dr. Naab highlighted that this fragmented structure created subtle competition rather than collaboration among institutions. He emphasized that the consolidation into one agency aimed to improve synergy and eliminate duplicated services.
The successful implementation of this modified taxation scheme could significantly increase Ghana's tax revenue base. It will require robust public education and simplified compliance procedures for informal sector operators. Effective communication will be essential to ensure understanding and acceptance among small business owners and sole proprietors. Policymakers and market analysts will closely monitor the scheme's impact on government revenue figures and its effect on the informal economy. This initiative represents a critical step towards formalizing a substantial part of the Ghanaian economy.