Author name: Dr Maxwell Ampong

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

If You’re Reading This It’s Too Late. I’ve always wanted to use that line. If you’re actually reading this on Monday 18th October, 2021, it’s then not too late. You can join us through Zoom conferencing using the link and logins below: Link: bit.ly/GEF2021Day1 Meeting ID: 912 806 3388 Passcode: ghana I will be serving as moderator together with the distinguished panel below: Please find below the Line-up for Plenary 2 of Day 1 of the Ghana Economic Forum 2021. Self-introduction by moderator. Introduction of what the Panel was set up for. Topic: Digitalization of the Ghanaian economy: e-currency, electronic payment systems; critical vehicle to promoting economic growth and development. This panel discussion is about the digital leadership of a person or an organisation, and the country’s preparedness to get on the train to national digitisation. It’s also about understanding our current readiness and the panellists views and appetite for paths that could and should be taken. I wanted the session to be real with real impact. So we’ve given the panellists the opportunity to view the questions beforehand. Some of them are from players in the industry who are in attendance, intended to invoke debate. So some of these questions might be challenging but we believe that this is what the Ghana Economic Forum has been set up for. For those of us reading the B&FT today, this is the event line-up listed as will happen. Short introduction of the Panellists, about 30-60sec each, read from their submitted profiles. Two questions will be put forth each of them. We shall listen to comments from two organisations. We shall take a couple questions from the audience, both here and online. Up to 3 minutes shall be given to each panellist for closing remarks. I will give the vote of thanks to panellists and organisers. And then we will conclude the panel. We begin with a question to Mr. Kwame A. Oppong, Head, FinTech & Innovation, Bank of Ghana. Question to Mr. Kwame A. Oppong: To our audience who’ve heard of the coming e-cedi, how different is the e-cedi from the Ghana Cedis I have in my pocket right now and how different is it from the cedi in our bank accounts? Question to Mr. Nana Yaw Owusu Banahene: With the coming of a central bank digital currency (CBDC), it’s worthwhile for us to define what that could mean to the average Joe or most of our audience who are in Business. Nana, what does having a CBDC mean to a business not unlike yours? Question to Mr. Ammishaddai Owusu-Amoah: Whenever I’m stopped in traffic after work by a police barrier, in my younger days I used to just think “hurry up and let me go home”. Now, I see those few seconds to a minute as my contribution to community safety. That’s how I view taxes now; our quota to national development. How will the e-cedi impact our GRA’s mission to aid citizens in contributing their quota, and the fight against tax evasion? Question to Mr. Andy Akoto: The accounting industry has been one that has seen first-hand what it means to migrate from the physical to the digital. What are some of the impact to expect when we drastically reduce the cost of information transfer, which is what I think a CBDC will do? Question to Dyann Heward-Mills: How can we build trust and ensure good governance in a digital currency, and what data protection protocols on a macrolevel will help the digital journey along? Question to Mr. Julian Opuni: I don’t think we can talk about digital currencies without mentioning the very widespread use of Mobile Money. Using that as a case study, what do you think has been the biggest impact of mobile money technology on business transactions, at least so far? Comment from Impact Market: Impact Market is an organisation that raises funding for low-income communities through easily accessible digital currency. I asked, “What are some of the biggest roadblocks that mid-size businesses and entrepreneurs face along the digitisation journey” and their CEO, Marco Barbosa said, and I quote: “I think some of the biggest roadblocks entrepreneurs face include the lack of: policies that incentivize risk taking, openness to learn new processes/technology, and proper infrastructure (both in finance, technology and education). Policy makers in financial, governmental, and the tax space needs to sit and have well-structured dialogues with MSMEs, entrepreneurs and large corporations to create more accessible processes. Much too often, industry leaders who are at the centre of decision and policy making fail to realise that a broken or ignored system goes on to negatively impact the overall economy of a state or country, and this further goes on to fuel dissent and unnecessary hardships for the very innovators who will move a country forward. In the specific case of finance and its infrastructure, how have you been preparing for the web3? I would recommend to do not block/delay innovation and new tech adoption with heavy regulation, specially blockchain. Embrace it, be friendly and welcoming when it comes to new technology exploration. Make efforts to learn first, and listen to the talent and entrepreneurs (the builders of the future). Create conditions where even foreign entrepreneurs would consider to move in. Some examples to drive more incentives, growth, and align interests, could include much lower tax to new companies for the first years, more investment in tech education and infrastructure, create funding mechanisms to drive more capital to the country (like matching foreign investments in local start-ups), facilitate access to credit and investment, provide tax incentives for big corporations when working with start-ups (either investing or being a customer), and more.  But, most important, to drive long lasting entrepreneurship and prosperity, you need first to empower local talent and unlock their human potential by fighting poverty effectively. Lack of access to finance (unbanked) is one of the main driving forces of poverty. Adopting web3 could dramatically increase efficiency and trust in processes and payments, while facilitating access to finance to everyone. My question to Rev. Owusu-Amoah is

The emergence of the novel COVID-19 virus pandemic has claimed over 4.5 million lives globally and still counting. In addition to the public health impact of the COVID-19 virus, it also severely impacted many economies across the world. As a result, many business activities in many countries have been disrupted. The impact of the virus has been severe and widespread across firms, with many enterprises facing varying degrees of losses (Apedo-Amah et al., 2020).  According to Shafi et al. (2020), it is clear that firms / enterprises worldwide are experiencing the significant impact of the pandemic on their businesses. Their findings reveal that small enterprises are even more severely affected by the pandemic compared to large enterprises.  As most economies are coming out and recovering from the pandemic, many enterprises are also doing the same. One of the critical things businesses and enterprises need most in this current dispensation is capital or funding. Thus, raising funds or capital in this era is exceptionally vital for businesses across the globe.  The global GDP growth rate in 2020 fell by 3.3% as a result of the coronavirus pandemic. Similar to the developed countries, most of the enterprises in developing countries are Small and Medium-Size enterprises (SMEs). These forms of businesses or enterprises are an integral part of the global economy. They are the economic backbone of most developing countries; they are the major source of employment and contribute substantially to growth.  As indicated by Shafi et al. (2020), small enterprises are more severely affected by the negative impact of pandemic compared to large enterprises. Because they constitute a sizable proportion of the economy, this directly becomes the cause of the decline in growth of these economies.  According to Taneja et al. (2016), SME’s are kinds of enterprises that are more flexible. They tend to adapt themselves to the changing economic situations, thereby allowing them to navigate through the economic downturns. Still, there have been severe downturns. Governments all over the world are reviving their economies and businesses are following suit, also reviving their operations. As a matter of fact, the recovery of economies globally is also largely contingent on the recovery of businesses or enterprises, especially SMEs. One thing that is vital for businesses and enterprises to revive their activities is funding. Funding is the lifeline of any business, and raising funding in this period is crucial for business enterprises to expand their activities and translate into the economy’s growth. Prior to the COVID-19 crises, businesses, especially SMEs, those in developing countries, find it difficult to finance themselves through retained earnings. Also, one of the main challenges hindering the growth of many businesses in developing economies has to do with getting access to funds or credit. The World Bank Enterprise Surveys of 119 developing countries indicated that lack of access to credit is a major obstacle to enterprises, especially start-ups.  Other studies have also found access to credit to be a major challenge facing SMEs in developing countries such as Ghana over the years (Abor & Biekpe, 2007; Mensah et al., 2019; Quartey et al., 2017).  High cost of borrowing, collateral requirement, limited availability of long-term loan facilities, and limited avenues of raising credit are some of the factors responsible for the challenges of raising capital or credit.  Moreover, post the emergence of the pandemic, it even more difficult for business and enterprises to raise funds because the pandemic hit the sources as well. There still have been avenues businesses are using to raise funding in this pandemic. Bank loans or loans from savings and loan institutions are the most widely used source of finance for businesses in developing economies. Especially in Ghana, most SMEs have to rely on banks for financing. Likewise, most small businesses also look to savings and loan institutions for their working capital. The downside to these sources of funding is that they come at a high cost for businesses. Moreover, these institutions were also heavily hit by the negative impact of the pandemic, thereby constraining their ability to give out loans to companies. As a result, most of these enterprises tend to direct their attention to other alternatives to seek funds to finance their ventures.  These alternatives include government and donor grant and loan programs. Government agencies in developed and developing economies are providing funding in the form of grants to support businesses during this pandemic. For instance, in Ghana, government Agencies such as the  Microfinance and Small Loans Centre (MASLOC) and the National Board for Small-Scale Industries (NBSSI), and the Ghana Enterprises Agency (GEA) provide support to SMEs and start-ups, especially in this pandemic era.  Some of these agencies offer loans facilities, and others give grants to local enterprises. The State has initiatives and programs such as the CAP Buss Program and Ghana Covid-19 Alleviation and Revitalization of Enterprises Support (CARES), Obaatan Pa to help local enterprises and mitigate the pandemic’s impact on the economy. Obtaining funds from these sources come with some merits and demerits.  Some of the advantages are that the helping enterprise will not have to be paid back funds that are given as a grant. Even in the case of loan facilities, the cost of borrowing tends to be much lower compared to borrowing from banks. Also, no part of the enterprise is taken in return for the grant. Thus no control is taken over the business. Nonetheless, the application process can be very time-consuming with issues of red tape and lots of competition is involved in obtaining funds from these sources. These sources of funding are not adequate to meet the financial needs of these enterprises. Therefore, businesses need to explore another avenues to raise the funds they need for their operations. There are other avenues that are largely not explored by SME enterprises in developing countries, which, if explored, will inure great benefit to the enterprises.  One of such avenues that SMEs in countries like Ghana can use to raise funds is through crowdfunding. A lot of enterprises in the developed countries use this route to obtain funding. Crowdfunding platforms allow businesses to raise funds