Seth Terkper advocates simple tax system for Ghana

Mr Seth Terkper, the Advisor on the Economy to the President, has called for a simplified tax system, including Value Added Tax (VAT) for Ghana, cautioning against distortions in the country’s main tax pillars.

The former National VAT Coordinator and Minister of Finance said simplifying the country’s VAT, in addition to income tax, excise tax, and import duty – the four pillars of the country’s tax system – would yield compliance and increased revenue.

He spoke at the launch of his book: “Value Added Tax in Africa: The Ghana Experience” in Accra on Wednesday, ahead of the Government’s intention to embark on a comprehensive VAT system, expected in September this year.

“Keep it simple, don’t make it complex. If the tax system is simple and broadened, compliance is easy,” he said, noting that the current effective VAT rate of approximately 22 per cent has often been distorted with levies, which mimicked the four main taxes.

He stated that VAT replaced several consumption taxes, but most of them had returned as levies, undermining the VAT’s integrity, and contributing to the country’s inability to increase its tax-to-Gross Domestic Product (GDP).

A 2024 survey by the Ministry of Finance, jointly produced with TaxDev researchers from the Institute for Fiscal Studies (UK), indicated that the country’s tax-to-GDP ratio was 13.8 per cent in 2022, below the government’s target of 18-20 per cent by 2027.

“The appeal I’m making is that we should allow the pillars of the tax system – in fact, of the fiscal system – to work. If the revenue is distorted, we won’t have sufficient money for expenditure suffers, and that leads to borrowing and debt,” Mr Terkper said.

Responding to a question posed by the Ghana News Agency, he noted that it was inevitable for some levies to be introduced due to some developments in the economy (like the COVID-19 pandemic).

“When we have difficulties, that’s where we should fall on mechanisms like the Stabilisation Fund, so that we’re not tempted to introduce new tax, making it difficult to administer and for taxpayers to comply,” he said.

Mr Julius Debrah, the Chief of Staff, commended Mr Terkper for the piece, citing its resourcefulness to tax practitioners and students, calling for a national learning to reform the country’s tax system to increase compliance.

He noted that while the collection of taxes was good for national development, he expressed concern about the mode in which some officials of the Ghana Revenue Authority (GRA) used in administering them.

“Anytime there is a fora and you bring businesspeople together, they seem to have an issue,” he said, encouraging GRA to intensify the level of public education to engender tax compliance.

Mr Abeku Gyan-Quansah, Partner, Tax Services, PricewaterhouseCoopers (PwC) and reviewer of the book noted that it tackled the political and economic dimensions of VAT as well as its institutional journey, making it comprehensive.

He described the launch of the book as timely, as it comes on the heels of the upcoming review of the country’s VAT system, saying; “It’s more than a technical manual… and appreciating the matters discussed will minimise changes made to VAT.”

Mr Gyan-Quansah noted that the book, which also comes on the back of the 30th year since the implementation of VAT, provided valuable lessons not only for Ghana but for Africa, calling for bold steps to reform VAT sustainability.

GNA

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