Editorial: Rethinking domestic revenue mobilisation enhancement

A tax dialogue workshop, recently held and organised by the Media Foundation for West Africa (MFWA) and Oxfam in Ghana, showed that in 2018 only US$25million from an estimated US$82million of potential tax revenue was collected – leaving a gap of almost      US$57m.

This was made public by Dr. Gloria Afful-Mensah, University of Ghana, when she presented a new study – ‘Illicit Financial Flows (IFF) and Revenue Mobilisation in Ghana’ – while noting that the country’s 16 percent tax-to-GDP ratio trails far behind peers such as Cameroon, Kenya and Senegal which average around 30 percent.

The research identifies the prevailing tax system’s complexity, widespread exemptions, a large shadow economy, weak compliance and corruption as key drivers of underperformance.

For instance, VAT exemptions alone cost 1.85 percent of GDP – equivalent to 72 percent of all VAT collected and place substantial pressure on the fiscal framework

Considerng the country’s debt had been rising by an average 11 percent annually between 2006 and 2023, the study indicates that closing the tax gap is essential for restoring fiscal stability and reducing reliance on borrowing and donor support.

In fact, some analyts believe there is urgent need for a comprehensive review of tax incentives, stricter administration and a shift to tax-gap analysis to strengthen enforcement and improve collection.

The study points out that the current tax regime remains heavily burdened by what it describes as “overgenerous” exemptions which significantly erode revenue.

Exemptions covering local foodstuffs, road passenger transport, pharmaceuticals and agricultural inputs – though socially driven – have created wide loopholes and a combined fiscal loss costing roughly two percent of GDP. These, together with a complex array of withholding tax rates, continue to complicate compliance and open avenues for abuse.

Also, corruption, apathy and a large shadow economy along with the current system’s complexity have promoted widespread evasion, deepening the country’s revenue mobilisation challenges. The report stressed a need for fundamental reforms to improve revenue mobilisation.

Indeed, it calls for a full review of corporate tax incentives and exemptions, supported by strong cost-benefit analyses to ensure they deliver real value to the economy.

Corroborating the above, Nana Oye Bampoe Addo – Deputy Chief of Staff at the Presidency – also opines that with global aid and grants declining, the country must urgently strengthen its domestic resource mobilisation to drive faster, fairer growth and reduce dependence on external support.

She observed that Ghana has for years suffered massive financial leakages which have weakened national revenue and constrained development. For example, annual losses from illicit flows, tax evasion, smuggling, under-invoicing, illegal mining, procurement fraud and systemic inefficiencies exceeded US$9billion.

Mrs. Addo highlighted these when she spoke at the Ghana Philanthropy Conference 2025, themed ‘Repositioning domestic resource mobilisation as a catalyst for inclusive and accelerated development’.

At the same event, Chief Executive Officer-Millennium Development Authority (MiDA) Alex Mould said Ghana has reached a pivotal point – where the country’s ambitions for inclusive growth and resilient infrastructure must be driven by its own financial, human and institutional resources rather than external support.

He added that true domestic resource mobilisation is not just about revenue collection but also requires strategic alignment, catalytic investment and strong accountability.

This invariably means the country has to strengthen its revenue mobilisation efforts to undertake its various developmental and infrastructural projects deemed neccessary for inclusive growth. We believe the research points to gaps in our revenue mobilisation efforts and a rethink of the current model must be considered to strengthen it for better results.

This will mean a reassessment of tax incentives and their overall impact on revenue mobilisation.

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