WHAT IS THE PURPOSE OF

TAXATION IN GHANA?

The answer seems obvious, the

purpose of taxation should aim at the
common good of the society.

In recent years the government has

been putting a lot of measures in place
and thinking of new ways to generate
revenue through taxation. A lot of people have offered creative ideas to increase government
revenue from taxation and as a result, there has been a lot of tax increments and the introduction
of new ones.

The idea that many residents in Ghana do not pay taxes is not completely wrong. A critical study
can show that it is obvious and this situation has led to the government brainstorming about how
to get many residents to pay taxes.

I ask myself always, what is the purpose of this tax that the government wants whoever is
eligible to pay. In simple terms, the government collects money from residents, which is
compulsory, and uses the money for the greater good of the society. One aspect of this statement
is the collection of revenue which seems to be the focus, and the second aspect is the spending of
the revenue.
I believe tax revenue is supposed to bridge the gap between the rich and the poor. Most taxes in
Ghana are regressive in practice. The poor bears almost all the burden but very little is done to
reduce their plight. Most parts of the country is highly underdeveloped. The gap between the
cities and other towns is very wide. Its no surprise that people keep migrating to the cities. The
government can use the tool called tax to reduce this problem.

I would like to introduce you to the income tax act 896. It did make some changes to the
previous act 592 and I think you should look at it. Below is a summary of some of the
components of it particularly on corporation tax.

Previous current

Location
Act 592 Act 896
Accra/Tema
25% 25%
Other Regional Capitals (except Northern, Upper East
and Upper West Regions)
18.75% 25%
Northern, Upper East and Upper West Regions
0% 25%
Free Zone Enclave
0% 25%
Outside other Regional Capitals
12.5% 25%

What is the purpose of this tax structure? Its obvious the government wants to increase revenue.
What happens when the government gets this revenue to the detriment of many parts of the
country? There are many parts of the country where the establishment of a company would do so
well for them. Yet the government has enacted a tax structure which gives entrepreneurs no
incentive to move to deprived communities.
How do many rural communities entice entrepreneurs to establish businesses in their
communities which lacks basic amenities when the company will be paying the same tax rate as
those in the big cities where roads are better and a lot of facilities exist to make running of
business easier?