The Head of the Department of Accounting at the University of Ghana Business School (UGBS), Prof. William Coffie, has emphasised the need for a strategic approach to integrating the informal sector into the tax system.
Speaking at a post-budget discussion organised by Lima Partners, on Thursday, March 20, 2025, Prof. Coffie highlighted the challenges of formalising the informal sector and proposed leveraging financial institutions to encourage tax compliance among small businesses.
Prof. Coffie suggested that existing financial institutions, such as microfinance agencies, the Ghana Enterprise Agency (GEA), and the yet-to-be-established Women’s Bank, could serve as avenues to promote tax compliance among small businesses.
“With the proposal to establish the Women’s Development Bank, we can use this and other small medium, and micro firms to comply with tax payment.
“We always talk about formalising the tax sector so that many people will pay tax but I ask, how do you formalise a sector that is not formal in its operations? Every year, we talk about bringing in the informal sector but what do we do about it? We keep saying that but there is no effort.
“We have a number of these microfinance institutions and agencies such as the GEA, MALOC, and now the Women’s Bank. Why don’t we use these avenues to encourage micro and small businesses to comply with the reporting and record-keeping of their taxes? And say that if a small business or a micro firm could produce your account for three years and continuously show that you are paying your taxes, we are going to support you with a micro-credit as a way to support them.
“I believe that once these small business owners know that there is support for them just by good behaviour, they may comply,” he stated.
Additionally, he proposed the introduction of a Tax Compliance Index to track and incentivize tax adherence among small businesses.
“We can have a Tax Compliance Index for these people. We have academics sitting there. You can ask them to do this to help implement some of these things. It can help with bringing in additional tax,” he added.