The World Bank has raised concerns that Ghana’s tax system is underperforming due to excessive tax exemptions and reliefs that significantly reduce the corporate income tax (CIT) base.

According to the institution, these generous tax breaks are hindering the country from maximizing its revenue potential.

From 2015 to 2020, Ghana missed out on an average of about 1.3% of its Gross Domestic Product (GDP) in corporate tax revenue each year.

The World Bank highlighted that the existence of over two dozen different types of tax breaks for companies is a major contributor to this shortfall.

The World Bank estimates that these tax breaks are costing Ghana around 0.5% of its GDP in lost revenue annually.

"By reducing or eliminating some of these generous tax breaks, Ghana could improve its tax system and collect more revenue from corporate taxes," the institution noted in its 8th Ghana Economic Update.

The Exemptions Act, 2022 (Act 1083), was presented to Parliament by the former Minister for Finance, Ken Ofori-Atta, in 2022.

In 2021, the Ministry of Finance initiated processes to secure approximately $335,072,712.13 in tax exemptions for 42 companies under the government's One District One Factory (1D1F) initiative.

Parliament in July 2024, approved the first of numerous tax waivers before the House, which the Finance Committee was previously blocking.

The approved tax waiver amounts to €1.5 million for the supply and installation of e-learning laboratories in Senior High Schools across the country.

Ghana’s personal income tax (PIT) accounts for approximately 15% of the country's total tax revenues, which is below the Sub-Saharan Africa (SSA) average of 18%. As of 2020, the country's PIT revenue was equivalent to 2% of GDP, compared to the SSA average of 3.5%, highlighting a gap between actual and potential PIT revenue of more than 2% of GDP.

Payroll taxes constitute over 99% of total PIT proceeds, with other forms of PIT, such as taxes on capital gains, investment income, and business income of the self-employed, making up less than 1% of the total—a stark contrast to more than 30% in some lower-middle-income countries (LMICs) like India.

In 2022, fewer than 25% of Ghanaians of voting age (18 and older) paid payroll taxes under the Pay-As-You-Earn (PAYE) scheme, and less than 0.2% declared any business income. This is in sharp contrast to countries with high PIT productivity, such as Norway, Sweden, and Canada, where almost 100% of the voting population files PIT returns.