Former Finance Minister and current Presidential Advisor on the Economy, Mr. Seth Terkper has offered an incisive analysis of Ghana’s tax revenue challenges, urging a fundamental rethink of policy direction and revenue mobilization strategies as the country seeks to transition into an upper-middle-income economy.
Despite years of policy reforms and initiatives, Ghana has struggled to meet its tax-to-GDP target of 15%, consistently falling short.
“As a country, we have not been able to achieve that long-term trend,” Terkper admitted. Citing data from the African Tax Administration Forum (ATAF) and the World Bank, he noted that Ghana’s average tax-to-GDP ratio as of the end of 2024 remains around 14%, with figures for 2023 and 2024 hovering near 13%.
He added that such pressure on the formal sector through multiple levies and high effective tax rates could actually incentivize tax evasion and erode the integrity of the tax system.
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Touching on one of Ghana’s most controversial tax instruments in recent years the Electronic Transfer Levy (E-Levy) Terkper described it as “a decent tax” conceptually, but poorly implemented.
“At the time, the justification was to avoid going to the IMF, the rate was just too high it was punitive. We could have done a lower rate, say 0.45%, and still raked in substantial revenue.” he recalled.
He noted that the policy should have been extended to cover online transactions and sales, as initially envisioned. “It was a missed opportunity. We need a comprehensive study of whether to tax this or not.” he said.
Terkper emphasized that when designing consumption taxes like VAT or E-Levy, policymakers must be careful not to penalize savings and investment.
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“The problem with the E-Levy was that it taxed savings. I’ve paid income tax already, and I want to move money electronically, and I’m taxed again?” he questioned.
“Consumption should be taxed, not the act of saving or investing.”He added.
