The Institute of Fiscal Studies (IFS) is proposing the decentralization of tax collection in the informal sector.
It is estimated that more than four million of the estimated eight million Ghanaians in the informal sector do not pay taxes. The institute argues the inability of these businesses to pay taxes to the state is largely as a result of lapses in the mobilization of revenue at the national level.
Speaking at a Pre-2018 budget forum, the Executive Director of the IFS, Prof Newman Kusi said, although promoting voluntary tax compliance in the informal sector is necessary, government must focus on devising new means of ensuring that businesses in this sector pay their due to government
“In the medium to long term, decentralizing the responsibility for informal sector taxation from national to sub-national government should take place as part of the government’s fiscal decentralization programme,” Prof. Kusi pointed out.
He added: “Presently, local governments collect fees, fines, property taxes and many others. Whereas the national government may see informal sector taxation as unrewarding, administratively difficult and politically costly, local authorities may have stronger incentive to collect.
“Government must adapt tax regimes to the characteristics of the informal operators and supplement the business environment with policies to reduce the cost of business registration, securing property rights, improving security and establishing dispute resolution mechanisms and providing affordable accounting services.”
The IFS is also proposing a more robust and effective monitoring of the activities of State Owned Enterprises to ensure that they are not only viable, but become reliable sources of revenue to fuel developments.
The theme for the Pre-2018 Budget Forum was “Mobilizing Adequate Domestic Revenue for Development”.
Meanwhile, a Deputy Information Minister, Kojo Oppong-Nkrumah has indicated that the budget to be presented to parliament next month, will address shortfalls in domestic revenue mobilization.
Source: Ghana/Starrfmonline.com/103.5FM
