A former Director General of the National Development Planning Commission, Nii Moi Thompson, has described plans to improve the taxation of the informal sector as misguided.
In the wake of the e-levy and other policies to widen the tax net, Mr. Thompson said, “unfortunately for us in Ghana, we are actually moving in the opposite direction.”
“We think taxing them [the informal sector] will transform the [economy], no, it wouldn’t work at all,” he added while speaking on The Point of View on Citi TV.
“The bulk of them are in the poor bracket where something like 74 percent of them are in what we call vulnerable employment, so even if we register all of them, we still wouldn’t get that much in taxation.”
He instead suggested that the government focus on “improving efficiency, raising productivity and raising incomes” in the informal sector to ensure a much higher tax base.
In 2014, the Ghana Statistical Service estimated that 86.1 percent of all employment was found in the informal economy; 90.9 percent of women and 81 percent of men.
“You can expand the tax net all you want, but what you may get is like Keta schoolboys; a lot of small fishes without the big ones. The focus should be on the tax base, the source of the income.”
“You can register all the kayaye in Ghana and tax them for the next 20 years. You still won’t get a fraction from what you get from just plugging holes at Tema,” he noted further, as an example.