Simplistic System the Antidote to Ghana’s Tax Compliance Challenges – Terkper

Former Finance Minister, Seth Terkper, has made a passionate call for Ghana to adopt a simpler, broader-based tax system as a powerful antidote to the country’s longstanding tax compliance challenges.

The presidential on adviser on economy says the solution to Ghana’s tax woes lies not in more levies and technical complexities but in going back to the basics even for the layperson to easily comprehend.

Speaking to the media at the launch of his latest book on Value Added Tax (VAT), Seth Terkper explained that taxation rests on just four pillars, with two major categories; income and expenditure.

“You earn income, you pay tax. Whatever is left, you spend, and you pay tax again. That’s it,” Mr. Terkper explained adding that all taxes are either on income or on spending. The broader you apply those two, he says the better the results for revenue and compliance.

For the former finance minister whose expertise is in taxation, he asserted that when people can clearly see where their taxes fall, whether it’s on what they earn or what they spend, they are more likely to comply willingly suggesting that confusion breeds evasion.

“Keep it simple. Don’t make it complex. If the tax system is simple and is broadened, compliance increases. Because a lot of people are able to comply without a lot of complexity without necessarily going to a tax expert,” he indicated.

The former minister didn’t mince words when addressing the proliferation of temporary levies, like those introduced during the COVID-19 pandemic or the global financial crisis.

“Yes, in times of crisis, you may need to introduce one or two levies,” he acknowledged. “But when the crisis is over, those levies must be removed. If not, they increase the tax burden and tempt people to evade or avoid paying taxes.”

Terkper’s remarks come at a time when Ghana is pushing for improved domestic revenue mobilization under its ongoing economic recovery programme. But tax compliance has remained low, with a narrow tax base and a large informal sector.

He believes that a simple system is transparent and builds trust and people are more willing to pay when they feel it’s fair and they can understand it.

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