Ghana is bleeding billions - Can we afford to stay silent?

Ghana is facing a serious crisis. The nation struggles with debt, inflation, and austerity measures. A hidden issue worsens the situation: tax revenue loss. Billions of cedis disappear each year due to systemic leakages. This deprives the government of funds needed for healthcare, education, and infrastructure.

Reports from various organizations highlight the scale of these tax losses. These include the Ghana Revenue Authority (GRA), Bank of Ghana (BoG), and others. They reveal alarming figures and dire consequences if no action is taken.

Illicit Financial Flows: $3 Billion Annually

The GRA estimates that 30% of potential tax revenue goes uncollected. High-net-worth individuals and foreign firms exploit legal loopholes.

The Ghana Integrity Initiative (GII) warns about tax evasion in its 2022 report. It states that Ghana loses $3 billion annually to illicit financial flows. This includes corporate tax evasion and profit-shifting by multinationals.

Gold Mining: $2 Billion Loss

The Minerals Commission reports that 60% of small-scale mining operations evade taxes entirely. The gold sector is crucial for revenue but suffers from underpayments.

According to the 2023 Annual Report on Small-Scale Mining, over 60% evade taxes and royalties. This results in an annual revenue shortfall of $500 million. Combined with corporate tax avoidance, total losses exceed $2 billion.

The Ghana Extractive Industries Transparency Initiative (GHEITI) also highlights this issue in its report. It states that illicit financial flows in gold mining cost Ghana about $2 billion annually.

Oil and Gas: $1.5 Billion Unaccounted

Weak enforcement allows multinationals in the oil sector to avoid taxes. The Energy Minister noted in a 2023 address that opaque agreements led to $1.5 billion unaccounted since 2020.

Customs and Trade: $950 Million Evaded

Corruption in customs remains a significant problem. The World Bank's report reveals that under-invoicing costs Ghana $950 million annually in import duties.

Cocoa Sector: $150 Million Lost to Smuggling

Cocoa smuggling undermines this vital economic sector. The Ministry of Food and Agriculture reported a loss of $150 million yearly due to smuggling activities.

Forestry and Logging: $250 Million Lost

Illegal logging costs Ghana approximately $250 million annually in unpaid royalties and taxes, according to the Forestry Commission’s report.

Informal Sector: GHȼ 15.6 Billion Gap

The informal economy employs 80% of Ghanaians but remains largely untaxed. The Bank of Ghana estimates an annual revenue gap of GHȼ 15.6 billion from this sector.

Public Procurement: $170 Million Wasted

Fraudulent contracts waste public funds significantly, as revealed by the Auditor General’s report which found that ghost projects wasted $170 million in 2023.

Fertilizer Subsidies: $100 Million Lost

Subsidized fertilizers meant for farmers are often diverted, costing taxpayers around $100 million yearly due to smuggling activities.

Ports and Harbors: $250 Million Loss

Corruption at ports leads to significant losses as collusion between officials results in a loss of import duties worth about $250 million each year.

In total, Ghana loses approximately $9.02 billion annually due to these issues. This amount could fund six years of free senior high school or eliminate healthcare deficits entirely.

Weak enforcement, outdated systems, and corruption perpetuate this crisis further. As stated by the Auditor General's report:

“Without plugging these leaks, fiscal stability will remain a mirage.”

These losses equate to:

- Six times the budget for free senior high school.
- Four-and-a-half times the National Health Insurance Scheme allocation.
- Half of the debt servicing cost for 2023 ($18 billion).

This cycle leads to borrowing, austerity measures, and underdevelopment risks insolvency without urgent reforms.

To tackle this crisis effectively:

1. Automate revenue systems through digitization.
2. Enforce stricter sanctions against malpractice.
3. Ensure public transparency for accountability.
4. Leverage technology to integrate the informal sector into formal systems.

These steps can redirect lost funds toward national development efforts but require political will and collaboration among institutions.

Revenue loss is not just an economic issue; it reflects moral failure too—deepening inequality while denying citizens basic services like healthcare or education.

As emphasized by PIAC’s report:

“Accountability must become a national priority.”

Ghana's future depends on addressing these issues now.


Author:
Prof. Isaac Boadi
Dean, Faculty of Accounting and Finance, UPSA
Executive Director, Institute of Economic Research Policy