This was a meeting initiated by the Ghana Hungarian Business Council, the European Union and EU Member States and EBO-Ghana in order for Ghana’s GRA to update EU Ambassadors and the representatives of European businesses in the country on two main issues: Domestic Revenue Mobilization (DRM) and Corporate Taxation on foreign businesses in Ghana.
As 80% of Ghana’s economy is informal, the tax base in Ghana is small and DRM problematic with a tax/GDP ratio below the region’s average. In parallel, corporate taxation is often confusing with tax authorities regularly targeting large companies for increased tax receipts with tax auditors systematically accused for corrupt practices.
GRA representatives provided an analysis of the all the latest developments in relation to DRM, the current challenges the authorities face in collecting taxes, the reforms that are about to be introduced and how GRA plans to rationalize corporate taxation.
On Domestic Revenue Mobilization:
- The last two years there has been macroeconomic stability in Ghana and this affected positively taxation and the work of GRA on the ground;
- In 2019, GRA exceeded its target by GH¢1.6 billion. For 2020, GRA has put ambitious targets for revenue mobilization (GH¢47-50 billion as compared to GH¢43.7 billion for 2019) and despite the fact that this is an election year, the agency is confident that they will be reached;
- Customs receipts for 2019 dropped by 14.2% because of a general decline of imports but also because of the lowering of the benchmarks applied at Ghana’s entry points;
- GRA has already started an ambitious reform plan for digitalization of domestic revenue which includes limiting human interaction in the collection of taxes, cashless transactions, the involvement of the banking sector for money/cash collection, the introduction of POS terminals in small shops and the automatization of the processing of the VAT;
- GRA plans to introduce ghana.com platform where all companies can consult on details of corporate corporate taxation in a transparent way.
On Corporate Taxation:
- 50% of the total revenue in Ghana comes from corporate tax;
- The different rates of VAT are admittedly confusing for SMEs and the transfer pricing regime unclear for both companies and tax auditors;
- A good part of GRA staff applies corrupt practices and has limited capacities and skills;
- GRA is introducing a system of ‘Auditors for auditors’ – staff which will control and audit GRA personnel for malpractices through sampling and a ‘hotline’ to which the companies would be able to communicate cases of corrupt officials; GRA has decided to go hard after corrupt auditors;
- GRA does not target only foreign companies but also domestic companies for tax receipts – there are several cases in Ghana of large tax avoidance, illegal financial transfers abroad, VAT fraud etc. GRA agrees that the corporate taxation regime needs to be clear, easy to follow and predictable;
- The rate for corporate taxation is not decided by the GRA but it is a political decision upon which GRA has little weight;
- Property tax has a lot of potential in Ghana and it is something that might be pursued in the future.