Widen tax net, don’t deepen it – Domfe to Mahama Administration
Dr Domfe argued that a key step toward improving tax compliance lies in formalising the economy. He said increased use of digital transactions could make it easier to identify and tax more individuals and businesses
An expert in public sector economics has urged the Mahama administration to widen Ghana’s tax net instead of placing heavier burdens on the few who already pay.
Dr George Domfe, a senior economist and founding president of the Africa Policy Lens, said on Peace FM’s Kokrokoo programme on Monday that Ghana’s narrow tax base is limiting revenue potential and stifling business growth.
“We should concentrate on expanding the tax base instead of burdening the same people already paying taxes to pay more,” Dr Domfe said.
He noted that although Ghana’s workforce—both in the formal and informal sectors—is estimated at around 14 million, only about 2.3 million people currently pay direct taxes.
“It is sad that only 2.3 million of them pay direct taxes. The rest are not captured by the tax net. A lot needs to be done,” he added.
Call for formalisation
Dr Domfe argued that a key step toward improving tax compliance lies in formalising the economy. He said increased use of digital transactions could make it easier to identify and tax more individuals and businesses.
“We should do more work to formalize the economy in such a way that we pay for almost everything electronically. If implemented well, that would lead to more people being roped into the tax net.”
He also criticised what he described as an over-reliance on taxes imposed on a limited number of businesses and consumers.
Impact on business
The economist warned that high interest rates, elevated electricity tariffs, and increasing tax burdens are undermining the competitiveness of local businesses.
“Only a deliberate policy aimed at roping in more people in the informal sector into the tax net can lead to a friendly business climate,” he said.
Dr Domfe dismissed recent proposals such as the imposition of a GHC1 tax on every litre of fuel purchased, describing them as short-term fixes.
“The government can do better in that regard than asking us to pay GHC1 on a litre of fuel purchased,” he concluded.
The Mahama administration, which returned to power earlier this year, has pledged to improve domestic revenue mobilisation as part of efforts to stabilise the economy.
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