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Ghana Loses $1.4bn to Illicit Financial Flows, Says Economist

 Ghana is losing a significant financial loss due to illicit financial flows, with an estimated $1.4 billion lost annually, according to Dr. Gloria Afful-Mensah, an economist.

Speaking at a tax dialogue organized by the Media Foundation for West Africa (MFWA) in Accra, Dr. Afful-Mensah emphasized the need for decisive action to tackle illicit financial flows especially in the extractive sector

We all have a responsibility as individuals, CSOs, media, and academia to address this issue," Dr. Afful-Mensah said. She noted that Ghana's institutions are good, but questioned whether they are strong enough to effectively deal with illicit financial flows.

The economist also expressed disappointment that the new tax reforms do not explicitly consider gender, despite the potential impact on women-owned businesses. "We want to see a more inclusive VAT system," she said.

Illicit financial flows are a major challenge for Ghana, with the country losing an estimated $1.4 billion annually due to tax evasion, excessive tax exemptions, and systemic inefficiencies within its tax system. Experts argue that stronger tax laws and better enforcement mechanisms are needed to curb illicit flows and retain more of Ghana's wealth within its borders.

Illicit Financial Flows, MFWA

On his part, Dominic Naab, Acting Head of Strategy and Research at the Ghana Revenue Authority (GRA), explained that Ghana's tax compliance efforts will improve with the introduction of a new Value Added Tax (VAT) system, effective January 1, 2026. The new VAT system reduces the effective VAT rate from 21.9% to 20% and simplifies the tax process, making it easier for businesses to comply.

The GRA aims to raise GH¢200 billion in tax revenue by the end of 2025, a significant increase from the GH¢153 billion collected in 2024. To achieve this target, the GRA will leverage technology and data integration, simplify tax processes, and utilize AI-powered tax assessment tools to identify inconsistencies and reduce tax evasion.

The authority will also collaborate with key institutions, such as the Registrar of Companies and SSNIT, to facilitate data sharing and integration. Additionally, the GRA plans to introduce a modified taxation system to bring more individuals in the informal sector into the tax net.

The tax dialogue highlighted the need for a comprehensive approach to address Ghana's tax challenges and improve revenue mobilization.

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