Ghana’s currency recovery has created an unexpected fiscal challenge, with government revenues dropping 30% as the cedi’s appreciation reduces collections from dollar-denominated taxes and duties.
The Ghana Revenue Authority disclosed that the local currency’s rapid strengthening from GH¢15 to approximately GH¢10.5 against the US dollar over three months has significantly impacted revenue streams. Port duties and extractive sector taxes, both collected in foreign currency, have suffered the most dramatic declines.
Commissioner-General Anthony Sarpong explained the mathematical reality facing government finances during the currency rebound. While economic fundamentals improve with a stronger cedi, immediate tax collections have fallen sharply in local currency terms.
“Once the exchange rate dropped from 15 to about 10.5, that’s a 30% sharp drop in cedi terms,” Sarpong told JoyNews. The petroleum and mining sectors, which remit substantial tax payments in dollars, have experienced similar percentage reductions in their contributions to government coffers.
The revenue authority faces a complex balancing act between celebrating currency stability and managing fiscal shortfalls. Import duties collected at Ghana’s ports represent significant government income, but their cedi value has contracted alongside exchange rate improvements.
Sarpong expressed confidence that current challenges represent temporary adjustment periods rather than permanent revenue losses. Lower import costs should eventually stimulate increased trade volumes, potentially offsetting exchange rate impacts through higher transaction volumes.
“Importers can import more” due to favorable exchange rates, the Commissioner-General noted. As businesses restock inventories and expand operations, tax collections should recover through increased economic activity rather than currency effects.
The authority is implementing structural reforms to reduce dependence on exchange rate fluctuations. A modified taxation system targeting small and medium enterprises represents the centerpiece of these diversification efforts.
Under proposed changes, businesses with annual turnover around GH¢200,000 would pay flat taxes of approximately GH¢3,000 to GH¢5,000 yearly. The 3% rate structure aims to capture millions of informal economy participants currently outside the tax system.
Ghana’s estimated five million small businesses represent enormous untapped revenue potential. The GRA hopes to register at least two million enterprises under the new framework, potentially generating GH¢10 billion in additional annual collections.
Digital payment taxation represents another frontier in revenue expansion efforts. New systems will automatically deduct taxes from online transactions at payment points, eliminating compliance gaps in Ghana’s growing digital economy.
“We have visibility of transactions taking place online and can deduct the tax component at the point of payment,” Sarpong described the technology initiative. The system should capture previously unmonitored digital commerce activity across multiple platforms and services.
Tax education campaigns will accompany technological implementations to improve voluntary compliance. The authority recognizes that successful revenue collection requires taxpayer understanding alongside enforcement capabilities.
The current revenue challenge highlights Ghana’s economic transition complexities. Currency stability benefits most economic sectors while creating temporary difficulties for government financing dependent on dollar-denominated income streams.
Financial analysts suggest the revenue impact reflects broader structural adjustments as Ghana’s economy stabilizes after recent turbulence. Sustainable fiscal management requires diversified income sources less vulnerable to exchange rate movements.
The GRA’s reform agenda addresses these vulnerabilities through expanded tax bases and improved collection mechanisms. Success could reduce government dependence on volatile currency-sensitive revenue streams while strengthening overall fiscal resilience.
Source: newsghana.com.gh
