No Surprise – Only 2% Of Ghana’s Informal Economy Pays Tax

We’d not be all that surprised by this finding, that only 2% of Ghana’s informal economy coughs up the tax due. It’s pretty much the definition of the informal economy that it doesn’t interact with the State. Including, but not limited to, paying the taxes due. The much more interesting question is what do we do about this? The answer being make it worthwhile to be part of the formal economy. Sure, taxes are a cost, but there are other benefits. Make those benefits outweigh the costs:

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””] The informal sector constitutes 70 percent of the business arena – but just two percent of them pay their taxes. A Chief Revenue Officer of the Ghana Revenue Authority, Richard Hakeem Quainoo who announced this in Accra, also stated that only 1.5 million of the expected six million taxpayers honoured their responsibilities, with 200,000 being from the informal sector. [/perfectpullquote]

This isn’t, specifically and particularly, because everyone’s just a scofflaw. It’s that the bargain on offer from the state of Ghana just isn’t attractive enough:

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]Those in the informal sector, he advised, should also register for their Tax Identification Number; because without that, they cannot transact business with the Registrar-General’s Department, Passport Office, the courts, among other institutions.[/perfectpullquote]

All of those things have a value. The state demands tax in response. But also accordance with another whole raft of rules as well. The trick is to make the benefits of that bundle outweigh the tax costs. Given that 70% of Ghanaian business doesn’t think it is worth it we’ll have to take that majority word, won’t we?