Finance Minister-Designate, Dr. Cassiel Ato Forson, has proposed a strategy that draws inspiration from Uganda’s successful approach to tax collection within the informal sector.
Speaking during his vetting by Parliament’s Appointments Committee, Dr. Forson highlighted Uganda’s innovative method of incentivizing informal workers, which has enabled the country to collect more taxes from this sector than many other sub-Saharan African nations.
“Uganda has been able to incentivize the informal sector and as such, they are collecting more taxes from the informal sector than most of sub-Saharan Africa,” Dr. Forson remarked, noting that this model could serve as a potential blueprint for Ghana.
According to Dr. Forson, Uganda’s success in this area is largely due to their focus on tax education and a pension system that encourages informal sector workers to participate in the tax system.
The government, through strategic outreach and education, explained to informal sector workers that a portion of the taxes they paid would go toward their pension contributions. This system provided a dual incentive: contributing to the national revenue and securing workers’ futures through pension savings.
“What Uganda did was to agree through tax education that a percentage of whatever you pay will be used as your pension contribution, even as the informal sector,” Dr. Forson explained, underscoring the importance of education and transparency in fostering tax compliance.
Building on this, Dr. Forson put forward a similar proposal for Ghana, advocating for the creation of an informal sector pension scheme. He suggested that a percentage of income tax payments could be redirected as pension contributions, effectively combining tax payment with future security for workers.
“My proposal is, why can’t we encourage or, through tax education, encourage the informal sector by instituting an informal sector pension scheme where you will plough back [a percentage] of whatever you pay as your contribution from your income tax as your contribution to formalise the informal sector and to incentivise them to pay?” he said.
This proposal is particularly timely as the informal sector in Ghana remains a significant portion of the economy. Millions of Ghanaians work outside the formal sector, from street vendors to small-scale traders and artisans.
While the sector contributes significantly to the economy, it has long posed challenges for tax collection, with many workers reluctant or unable to pay taxes due to a lack of incentives or understanding of the benefits.
Finance Minister-designate, Dr. Cassiel Ato Forson, has proposed a strategy that draws inspiration from Uganda’s successful approach to tax collection within the informal sector.
Speaking during his vetting by Parliament’s Appointments Committee, Dr. Forson highlighted Uganda’s innovative method of incentivizing informal workers, which has enabled the country to collect more taxes from this sector than many other sub-Saharan African nations.
“Uganda has been able to incentivize the informal sector and as such, they are collecting more taxes from the informal sector than most of sub-Saharan Africa,” Dr. Forson remarked, noting that this model could serve as a potential blueprint for Ghana.
According to Dr. Forson, Uganda’s success in this area is largely due to their focus on tax education and a pension system that encourages informal sector workers to participate in the tax system.
The government, through strategic outreach and education, explained to informal sector workers that a portion of the taxes they paid would go toward their pension contributions. This system provided a dual incentive: contributing to the national revenue and securing workers’ futures through pension savings.
“What Uganda did was to agree through tax education that a percentage of whatever you pay will be used as your pension contribution, even as the informal sector,” Dr. Forson explained, underscoring the importance of education and transparency in fostering tax compliance.
Building on this, Dr. Forson put forward a similar proposal for Ghana, advocating for the creation of an informal sector pension scheme. He suggested that a percentage of income tax payments could be redirected as pension contributions, effectively combining tax payment with future security for workers.
“My proposal is, why can’t we encourage or, through tax education, encourage the informal sector by instituting an informal sector pension scheme where you will plough back [a percentage] of whatever you pay as your contribution from your income tax as your contribution to formalise the informal sector and to incentivise them to pay?” he said.
Don’t miss out! Get your daily dose of Entertainment news and more straight to your phone. Join Ghana Street Journal Whatsapp channel now!
