Bawumia’s proposed flat tax regime could be a game changer, says economist

The head of research at Danquah Institute, Dr Frank Banor believes the proposed flat tax regime could help rope in more taxpayers from the informal sector

The head of research at Danquah Institute, Dr Frank Banor, has described the proposed flat tax regime by Vice-President Mahamudu Bawumia as a good initiative which could broaden the tax net and rope in more taxpayers from the informal sector.

The 2024 presidential candidate of the governing New Patriotic Party (NPP), Dr Mahamudu Bawumia has promised to introduce a very simple, citizen and business-friendly flat tax regime if elected president in the December elections.

Speaking on Wednesday (7 February) at the University of Professional Studies, Accra (UPSA), Bawumia said his government will provide tax amnesty to individuals and businesses for a specified period.

“My administration will introduce a very simple, citizen and business-friendly flat tax regime. A flat tax of a % of income for individuals and SMEs (which constitute 98% of all businesses in Ghana) with appropriate exemption thresholds set to protect the poor.”

“With the new tax regime, the tax return should be able to be completed in minutes! We will also simplify our complicated corporate tax system and VAT regime,” he said.

Speaking on the Asaase Breakfast Show on Thursday (18 April), Banor said the flat tax regime could be a game changer in Ghana’s revenue mobilisation drive.

“…. Our economy is an informal economy and the idea is to bring so many of the informal sector on board and we know that the sector is dominated by micro small medium enterprises which consist of 85% of the total economy.

“Amazingly, the highest form of employment is generated by these companies but if you look at their contribution to overall GDP, in terms of taxation, it is less than 20%.”

“So how do we incentivize all these people by coming on board, you can only achieve that by a flat rate system…. and no one will shy away from paying their tax,” Banor said.

Listen to Dr Frank Banor in the attached audio clip below: 

Reporting by Fred Dzakpata in Accra

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