November 2021

Digitization is one of the niche subject matters in the field of information and communication technology. However, its use and application have reached other fields, including the economy, to accelerate growth and development in recent times. The application of digital technologies is expected to characterize future economies as it offers a better quality of life. Many countries across the globe, especially in Africa, are increasingly embarking on the digitization of their economies. Ghana is one of the African countries recognizing the opportunity that digital development (digital economy) has for creating decent jobs, enhancing productivity, innovation, and accelerating growth. Ghana began its digital governance strategy in 2005  (Demuyakor, 2021). The government of Ghana has undertaken several flagship projects, such as the digital address system, which is essential for digital commerce, and more aggressive automation of government business processes (World Bank Group, 2019). Ghana has in place a widespread fiber-optic infrastructure and international bandwidth from five Submarine Optic Fibre cables, which are helping to provide adequate bandwidth capacity to support the digitalization agenda. The country is currently implementing the ICT4AD policy that is promoting public and private investment in various modes of infrastructure to support Ghana’s Accelerated Development Agenda. Some of the flagship digitization projects include National ID, National Digital Property Addressing System, Mobile Money Interoperability, and Paperless Ports, and e-Government Interoperability Framework (e-GIF) (World Bank Group, 2019; Songwe, 2019; Tapscatt & Agnew, 2000). The Government of Ghana, over the years, is making significant efforts and investments that are expected to position the country as a regional hub for digital services. With the upcoming e-cedi, the nation gets a central bank digital currency that will be regulated by the Bank of Ghana. At the 2021 Ghana Economic Forum (GEF) held last month at the Kempinski Gold Coast Hotel, Accra, I interacted directly and publicly with the distinguished Mr. Kwame A. Oppong, Head of FinTech & Innovation at the Bank of Ghana. During Panel 2 on Day 1 of the Ghana Economic Forum, I expressed that I am 100% for regulation, actually 1000% for it. My fear with over-regulation is that it could potentially create black-market economies that would aim to circumvent the protocols that Bank of Ghana has rightfully set in place to protect the stakeholders of the nation. With the ongoing National Digital Agenda, we are all well aware that the Western World is very much interested in having a stake in all of it. The West and the rest of the World are now very ready and willing to invest in Africa especially when it is tech-based. Flutterwave, OPay, Interswitch, Palmpay and Paystack are a few of the many tech-based entities that have reaped the benefits of a continent leaning more and more towards digitalisation. The youth across Africa are now innovating and also leaning more towards tech as they realise that’s where the future is. When the e-cedi finally arrives, it’ll be a game-changer because suddenly, the penny will drop for many naysayers and then they’ll want to get in on the action. I asked Mr. Kwame A. Oppong how Bank of Ghana is preparing the road to certification for these individuals that’ll be innovating left right and centre. My goal was not to suggest that BoG make it too easy because I recognise and agree that KYC and other due diligence measures on the applicant, the tech and how it integrates into the system must be carefully looked at. Still, I believe something should be done to promote and encourage widespread innovation, albeit still regulated. The Head of FinTech and Innovation for Bank of Ghana, Mr. Kwame A. Oppong answered my question. He said: “Thank you very much. I think one thing you’ll observe over the years is that everything Bank of Ghana has done relating to this space has been by design. It’s been carefully thought-through policy that has gotten to the point where you’re hearing some of these results. For instance, we can make a point about mobile money growth between before COVID and after COVID, even during the COVID. I think one of the interventions we made has to do with some enhancements to subscriber wallet balances, limits, etc. We saw some significant uptake in merchants acquiring digital means of collecting payment, and that trend has not subsided. It actually has continued strongly. All through that period we have not stopped. And so you would, for instance, have noticed that we introduced a new set of merchant account categories, which recognises the fact that if you look at the average merchant anywhere from a market in Tamale, a market in Takoradi, a market in Accra, some of the requirements that were in place in the law for them to be onboarded as merchants, if you looked at it, it was a bit onerous. It may be okay for maybe a Kempinski or an organisation somewhere mid-range, but it was a bit burdensome to ask that of them. And so we introduced a new merchant account category and the corresponding requirements for onboarding them that is consistent with their tier KYC approach within the mobile money space, which by the way, Ghana is one of the first countries to implement it. And you see this across the sub region a bit more. We have subsequently implemented several policies and embarked on several initiatives, including the Sandbox. I heard a conversation about Singapore and some other countries. We’re working with them on a Business Sans Borders, which is a Business Without Borders initiative that connects a financial trust corridor between Ghana and Singapore: Ghana as a hub for our region and Singapore as a hub for their region as well. There are several things that we’re doing. But let me point out this: when it comes to the issue of regulation vis-à-vis investment, let’s first understand that so far how we’ve evolved policy has wound up in consumers voting with their feet. When the Findex Survey by the World Bank was published in 2018, then using data from 2017, it put Ghana’s financial inclusion number at 58%. At that time we only had about 11 million mobile money customers. The population was about 29 million overall and

Despite being one of the largest and reliable sources of revenue to the government of Ghana, tax revenue collection in Ghana is constrained by many factors. The tax to GDP ratio of Ghana remains far below what the government targets to achieve by 2023. The Government of Ghana’s target is to achieve tax to GDP of 20% by 2023. However, the tax to GDP ratio of Ghana as of 2019 was 13% and has since been below 15% (Malik et al., 2021). Rev. Ammishaddai Owusu-Amoah, the Commissioner-General of the Ghana Revenue Authority (GRA), at the recently ended 2021 Ghana Economic Forum, stated that Ghana’s tax to GDP has now moved from 12% to 13%. This is a common phenomenon observed among developing countries, especially those in Sub-Saharan Africa. Tax revenue to GDP in developing countries is below 15% compared to 18 percent of emerging economies and 26% percent of developed economies (Lagarde, 2018). One of the factors responsible for the low tax collection in most developing economies such as Ghana is due to widespread tax evasion. Tax evasion implies the efforts by taxpayers to evade the payment of taxes by illegal means. It is the use of illegal means to pay fewer taxes or no taxes at all (Slemrod & Weber, 2012). According to the Commonwealth Association of Tax Administrators (CATA), when tax laws are highly complex it makes compliance burdensome for taxpayers, thereby making them less likely to comply with tax laws. Literacy also plays a role in how people comply with the tax laws. The uneducated often find it difficult to understand the need for full compliance. Public education on the importance of tax and the consequences of not complying with tax obligations is encouraged in this country as the GRA ramps up its efforts to gather more taxes more easily. The perception of taxpayers about the tax administration with regards to how they are treated by the tax administrators and what the tax collected are used for is also an important factor in determining tax evasion. If the tax system is not transparent, people will not feel encouraged to pay their taxes. The recent efforts of the GRA to digitise their processes and do more press helps in this regard. A lot was learnt and better understood of Ghana’s tax intentions when Rev. Ammishaddai Owusu-Amoah, the Commissioner-General of the Ghana Revenue Authority (GRA), attended the 2021 Ghana Economic Forum and answered questions on a panel I moderated. Also, the issue of limited resources and the capacity of our tax administration can be a major hindrance to tax collection in Ghana. The Government needs to ensure that there isn’t the problem of inadequate numbers of skilled personnel coupled with poor infrastructure and logistics, for that will affect GRA’s efforts. This challenge threatens to affect the ability of the tax collector to properly carry out their roles of enforcement, education, and collection effectively and efficiently. This can adversely affect the perceptions of taxpayers about the risk of evasion. They may perceive the risk of getting caught to be low likewise the consequences of non-compliance. Another factor that fuels tax evasion has to do with the nature of the economy. In a predominantly cash-based economy, people are more likely to evade paying tax, since it will be easy to hide income and transaction activities. Moreover, in Ghana, the economy is largely cash-based, as a result, evasion has a very conducive atmosphere to thrive. Despite the advancement in mobile money and internet banking among others, the majority of the economic transactions that take place in the country are done in cash. Any factor that will adversely affect the compliance of taxpayers will encourage evasion to occur. There are serious consequences that tax evasion imposes on an economy. It results in low revenue mobilization due to loss in tax revenue. This might explain why the tax to GDP ratio is still below the target of the government. The ability to collect enough revenue limits the government from carrying out its mandate to the fullest. It hinders the efficient allocation of resources, and hinders certain sectors of the economy from receiving the necessary attention needed. This undermines government efficiency and hinders the growth of the economy likewise the welfare of the citizenry. In addition, a further implication is that it can impose a different tax burden on taxpayers. Government or tax authorities may decide to compensate for the loss in revenue by raising tax rates. This increases the tax burden on the existing small number of taxpayers in the country. The evasion can become even more severe if the rate is high. It affects work efforts and causes savings to decline or even diversion of investment resources in the economy. Widespread tax evasion imposes an extra cost on tax authorities, thus in trying to curtail the problem, the authorities will need to put in mechanisms to monitor the evader. This will require extra use of already scarce resources, which could be used for other productive ventures in the economy. The government’s recognition of the widespread of this phenomenon and the unsatisfactory performance of tax revenue collection over the years has necessitated governments over the years to embark on several reforms geared toward improving tax revenue collection. However, these reforms have not yielded much significant improvement in tax revenue performance in Ghana (Osei & Quartey, 2005). Moreover, technology trends over the years inevitably change how economies operate. This has a huge impact on many aspects of our everyday life including on tax administrations. Many governments and economies are adapting to these technological advancements to prove the collection, processing, tracking, and dissemination of information have helped enhance public service delivery. The government of Ghana has also recognized these developments and is adapting to the digitalization of the economy. Government is increasingly turning the economy digital as evident from its digital inclusion agenda. The government of Ghana has embraced digitization as a key policy goal and recently introduced a number of programs designed to develop a