For any nation to deliver on its promise to citizens, it must mobilize the resources to fund essential services. In Ghana, taxes account for over 60% of total government revenue. They build hospitals, stock classrooms, construct and pave roads, and secure communities through the provision of amenities and social facilities. Yet for too long, our tax system has left a large segment of Ghanaians outside the conversation.
That is why the Modified Taxation System (MTS) represents Ghana’s surest way to inclusion in tax administration.
The reality we must confront
A significant portion of the country’s economy operates in the informal sector – market traders, artisans, small retailers, and service providers. Many of them want to contribute to national development but face barriers: complex filing processes, limited access to tax offices, and a perception that the system is not designed for them.
When these businesses remain outside the tax net, the burden falls disproportionately on compliant taxpayers. It also denies government the full revenue needed to deliver on infrastructure, healthcare, education, and security. Inclusion is not just fair – it is necessary for growth.
What the Modified Taxation System does differently
The MTS is a simplified tax regime introduced by the Ghana Revenue Authority to bring MSMEs and informal sector operators into the formal tax system.
The MTS is a simplified tax regime introduced by the Ghana Revenue Authority to bring MSMEs and informal sector operators into the formal tax system. Under the leadership of Mr Anthony Sarpong, Commissioner- General of the GRA, the MTS Implementation Committee, has been working with a dynamic team of great men and women at the GRA in implementing strategies to removing complexity in the tax administration system for the informal sector.
Under the MTS, eligible taxpayers do not wrestle with detailed accounting or annual returns they are not equipped to prepare. Instead, they pay a presumptive, simplified tax based on factors like business type, location, and turnover. Registration, filing, and payment are streamlined. Compliance becomes predictable and affordable.
Why inclusion matters
Inclusion through the MTS is about three things:
Fairness: Everyone who benefits from public services should contribute their fair share. MTS expands the tax base so the burden is shared more equitably.
Opportunity: When a business enters the formal tax system, it gains access to credit, business support services, and government procurement. Tax compliance becomes a gateway, not a barrier.
Accountability: I have said this often – a compliant taxpayer has the moral authority to demand accountability from government. When more Ghanaians pay tax, more Ghanaians can rightfully ask, “What are we getting for it?” That is the social contract that drives development.
Building trust through education and technology
The success of the MTS depends on trust. That is why the GRA’s Sustained Tax Education Programme is investing in awareness creation.
Ghanaians must know their obligations and the benefits of compliance.
The GRA is also leveraging technology – the Integrated Tax Administration System and digital payment platforms – to make tax services accessible where people live and work. Inclusion means meeting taxpayers where they are.
The path forward
Ghana’s development cannot be financed by a narrow base. The Modified Taxation System offers a practical, dignified way to bring more Ghanaians into the tax system without overwhelming them. It recognizes the realities of small business and rewards the decision to formalize.
Inclusion is not about adding names to a register. It is about making every Ghanaian see themselves as a stakeholder in our nation’s future. The Modified Taxation System is how we get there. It is Ghana’s surest way to build a tax culture rooted in fairness, participation, and shared prosperity.
Policy proposal for reform:
Policy Reforms to Ease Implementation of Ghana’s Modified Taxation Scheme (MTS) and Align with Global Best Practice
Ghana’s Modified Taxation Scheme (MTS) is a critical tool for bringing the informal sector and micro enterprises into the tax net. To make it effective and aligned with global practice, the following policy reforms should be prioritized:
Simplify Tax Design and Administration
Global practice: Countries like Rwanda, Kenya, and Uganda use presumptive taxes or turnover-based regimes with flat, predictable amounts for micro enterprises.
Recommended reforms for Ghana:
Set clear, tiered thresholds: Define MTS eligibility by annual turnover, number of employees, and physical location, not by complex accounting records.
Flat-rate, sector-based bands: Use simple categories – e.g., market trader, artisan, small retailer – with fixed annual or quarterly amounts. Avoid percentage calculations that require bookkeeping.
Single payment point: Allow payment via mobile money, banks, and GRA-approved agents. Reduce the need for physical visits to tax offices.
Strengthen Taxpayer Education and Communication
Global practice: Tanzania’s TRA and India’s GST Council run continuous, localized taxpayer education campaigns using local language, radio, and trade associations.
Recommended reforms:
Scale the Sustained Tax Education Programme: GRA should partner with market associations, religious bodies, and local media to deliver MTS information in local languages.
Use “benefit messaging”: Link tax payment to visible local projects – “Your MTS payment helped pave this road.” This builds the tax morale that countries like South Africa rely on.
Deploy Tax Ambassadors: Recruit respected market leaders and trade association heads as voluntary tax advocates.
Leverage Technology and Data
Global practice: Kenya’s iTax and Rwanda’s RRA use mobile integration and third-party data to identify and register informal operators.
Recommended reforms:
Integrate MTS with Mobile Money and GhanaPay: Allow taxpayers to register and pay using USSD codes without smartphones.
Use geospatial and market data: Partner with city authorities to map markets and commercial areas. This helps GRA identify potential MTS taxpayers without intrusive audits.
Digitize registration: Create a 5-minute MTS registration via SMS or a simple app, issuing digital tax IDs immediately.
Create Positive Incentives for Formalization
Global practice: Countries like Colombia and Peru link tax registration to access to social protection, credit, and business licenses.
Recommended reforms:
Bundle MTS with benefits: MTS registrants should get:
– Access to the National Pensions Scheme and NHIS on preferential terms
– Eligibility for micro-credit and government procurement set-asides
– A “Tax Compliance Certificate” that reduces fees for business permits
Remove penalties for late entry: Offer a 12-month “grace period” with no penalties for businesses joining MTS voluntarily.
Institutional Coordination and Capacity
Global practice: Brazil’s “Simples Nacional” works because federal, state, and municipal authorities share a unified system for micro enterprises.
Recommended reforms:
Inter-agency data sharing: GRA, MMDAs, Registrar of Companies,Registrar General’s Department, NIA and NHIA should share business data to avoid duplicate registration and reduce taxpayer burden.
Train frontline GRA staff: Equip district tax officers with negotiation and customer service skills, not just enforcement tools. The goal is facilitation, not fear.
Monitor and publish results: GRA should release quarterly data on MTS registration, revenue, and taxpayer satisfaction to build public trust.
Ensure Fairness and Feedback Mechanisms
Global practice: Uganda’s presumptive tax was adjusted after taxpayer feedback revealed rates were too high for some sectors.
Recommended reforms:
Annual review of MTS rates: Adjust bands based on inflation and taxpayer feedback to avoid overburdening micro businesses.
Establish a Taxpayer Grievance Desk: A toll-free line and market-based help desks for MTS taxpayers to resolve disputes quickly and without legal cost.
Conclusion
The Modified Taxation Scheme can succeed if it is simple, beneficial, and visible. Global experience shows that informal sector taxation works best when governments reduce complexity, offer clear benefits, and treat micro taxpayers as partners in development, not targets of enforcement.
With these reforms under the RESET agenda, Ghana can move closer to a tax system where inclusion is real, compliance is voluntary, and revenue growth supports sustainable development.
Ghana has a great opportunity now as the Income Tax Act 2015 and the Local Governance Act, 2016 (Act 936), are being reviewed. Schedule 2 of the Income Tax Act 2015 and Schedule 12 of the Local Governance Act can be reviewed together and aligned to ensure harmony with the collection and administration of taxes at the local government level focusing on informal sector.
Let us embrace it.
#Know your taxes, Pay your taxes and let us build Ghana together.
By Elsie Appau-Klu Esq
Elsie Appau-Klu Esq, is Technical Advisor to the Commissioner-General, Ghana Revenue Authority; National Coordinator, Sustained Tax Education Programme; Chairperson, Modified Taxation Scheme Implementation Committee.
