Fair taxation is the most sustainable way of financing development and ending aid dependency. Tax has a redistributive function which can reduce inequality, when it is designed in an appropriate way, especially through progressive taxation of income and wealth.
But tax revenues in Ghana fall short of what realistically could be obtained when analyzing the actual potential and capacity, both in terms of efficiency and progressiveness. Broadly, tax policies in Ghana are biased towards collecting taxes easily, including consumption and wage taxes which impose a higher tax burden on poorer households and formal sector employees.
Ghana’s tax/GDP (rebased) ratio for 2018 is below 13% (IFS, 2018), compared to 34.2% average recorded among OECD countries and about 18.2% among its West African neighbors (OECD, 2018). This low performance is due to a combination of several factors: weak tax administration, regressive tax regime, dependence on consumption taxes, tax incentives and insufficient use of capital taxes (wealth, property, capital and land are under taxed). Among the revenue potentials to improving DRM in Ghana, property taxation remains the best option, as it is equitable and provides the most sustainable form of local government financing.
Within the developed nations, on average, property taxation account for about 2.2% of GDP. Interestingly, property taxation makes up only 0.38% of GDP in Africa (ICTD, 2019). In Ghana, taxes are paid on only 9% of properties. With booming cities in Ghana through the growth in affluence level, the continual influx of people into the country for oil or other businesses, and rising investment into the property sector, property taxation now presents a great opportunity to raise the needed revenue to finance local development. Having a successful initiative to tax properties within Ghanaian cities could help provide a secured form of financing in critical areas such as healthcare, sanitation, education and offer direct support to the vulnerable at the local level.
The main challenge to effectively design a property taxation system in Ghana and other developing countries is the lack of data about property ownership data and standard valuation records. In Ghana, the government’s digital property addressing system (currently underway) will be pivotal to the success of any property taxation initiative. So far, few properties (mainly in large cities) have been captured on the system, indicating that properties liable for the payment of taxes (in some selected areas) can be readily assessed, but not so easily in other areas. As the government plans to finish the process soon, it will be an added instrument for District Revenue Mobilization (DRM). During the 2022 budget presentation, Government indicated the introduction of the Unified Common Platform (UCP) for property tax administration in Ghana, to be administered by the Ghana Revenue Authority (GRA) starting from the first quarter of 2022.
The Covid-19 pandemic has reduced governments revenues and gradually most of developing and middle-income countries such as Ghana are struggling to meet the growing budget deficits. In response, most of these countries are stepping up to introduce tax reforms which will allow increases in tax revenue. The challenge is how to effectively balance the pressure to raise revenue and the need to incorporate progressivity and fairness in all these new tax reforms. For this to happen, space for citizen participation is crucial, while facing corporate and elitist pressures.
Why CSO capacity training
As noted earlier, property taxation remains one of the most efficient and sustainable ways to generating revenue for development, especially at the local level. Although there are growing consensus for property taxation to be rolled across the country, CSOs have limited understanding of the sector. In addition, the systems and structures government are proposing to implement are new to the civil society. A capacity program/training to equip CSOs working in property taxation is therefore very timely. CSOs must be able to understand the processes, be able to advocate for fairness to ensure progressivity in the system. Again, the need to deepen accountability is very important. As the government embarks on these tax reforms to collect more revenue, accountability will be
pivotal (going forward) to ensure that revenue collected are challenged to providing the needed social services to the people.
To understand national level property tax administration – the unified common platform
Explore key advocacy opportunities for CSOs on property taxation
Understand the property tax administration at the subnational level – property rates and subnational level budgeting process.
This will be a 3-day capacity building training training on property taxes and local budgets (training schedule to be agreed with partners and the facilitators). Training will be organised at Tamale for partner staff working with the Sagnarigu District and Sharma District Assemblies. Also, key assembly staff (such as budget officers, MIS etc.) working on property taxation will be included. The training expected to be led by personnel from the Ministry of Local government, the district assemblies, and other relevant partners in the property taxation space in Ghana.
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