Tax Expenditure Estimates in Ghana

Abstract

Like many countries, Ghana provides tax incentives to encourage private investments and reduce the tax burden of certain sectors and the poor. However, these exemptions come at a cost. This chapter uses data provided by the Ministry of Finance of Ghana to estimate the cost of these exemptions, which are also known as tax expenditures. The data provided included the customs import data on exemptions, Ghana’s Supply and Use Tables, Value Added Tax (VAT) returns and data collected by the committee from income tax returns. The overall tax expenditure for the year 2013 was 5.2 percent of GDP, with tax expenditures on VAT constituting the biggest part at 4.2 percent followed by customs duty exemptions at 0.9 percent. This makes Ghana’s tax expenditure the 14th highest in a list of 30 countries for which tax expenditures estimates are publicly available. While data on the 2014 income tax and external VAT is not fully available, the tax expenditure for domestic VAT and customs was 5.1 percent in 2013 compared to 5 percent in 2014.