The era when many informal-sector businesses and workers pay taxes only when faced with enforcement or coercion, rather than voluntarily, has given way to a collaborative regime between the Ghana Revenue Authority (GRA) and taxpayers in the SME sector.
This collaborative approach, adopted by the GRA, is touted as an innovation to position the taxpayer as the driver of processes that make tax payment simple and friendly, without compulsion from the tax regulator, the GRA.
Since its unveiling in late November last year, the Modified Taxation Scheme (MTS), a simplified tax system designed for informal-sector workers and small businesses in Ghana, has been contributing significantly to revenue mobilisation, particularly toward meeting GRA’s GH¢230.13 billion tax target for 2026.
The MTS initiative is part of GRA’s contribution to Ghana’s RESET Agenda, in widening the tax net under the progressive leadership of the Commissioner General of the GRA, Mr Anthony Kwasi Sarpong.
Businesses are progressing and thriving through the MTS, enabling the economy to improve through a simplified and efficient implementation of a digitised tax system and sustained tax education.
Indeed, the deployment of the MTS is already contributing to achieving the total revenue target for 2026 collection, as first-quarter 2026 revenue is 20 per cent higher than in the same period last year.
The MTS’s foremost priority is to replace complex, traditional tax assessments with a “pay-as-you-go” digital approach.
As an abridged tax tool, the MTS simplifies registration and payments for individuals, using presumptive taxes and digital tools to enhance compliance, whilst removing the complex processes of the standard tax system.
This certainly is a redesigned approach to make filing and paying taxes more practical for informal workers.
Indeed, Ghana’s tax compliance challenges, particularly in the informal sector is well-known. Data from the Ghana Statistical Service’s 2023 survey revealed that the informal sector accounts for 80 per cent of the country’s workforce. However, its contribution to GDP is just around 30 per cent. This gap is further and largely driven by complex tax processes, low tax morale, and inadequate tax awareness.
Yet, the Modified Taxation Scheme reflects GRA’s commitment to modernising Ghana’s tax administration in line with current practices.
This scheme introduces simplified technology-driven processes that make compliance more convenient, predictable, and transparent, especially for small and medium enterprises, including individuals who form the backbone of the economy.
By reducing bureaucracy, streamlining registration and payments, and limiting discretion, the Scheme minimises the risk of non-compliance and fosters trust between taxpayers and the GRA.
More importantly, the MTS tool ensures that tax payment becomes as simple as making a money transfer.
For instance, the Scheme, in simple terms, allows individuals and enterprises whose income does not exceed GH¢500,000 (half a million) to pay a flat rate of 3 per cent. Let me give you a hypothetical example.
The above means that an individual or small enterprise whose income is, for example, GH¢200,000 annually pays GH¢6000 for the whole year.
Another example is that an individual who earns GH¢25,000 annually pays GH¢750 for the year.
The GRA is certain that the Modified Taxation Scheme has significant potential to raise revenues, estimating the population in this segment at about 8 million.
Indeed, the MTS sets a precedent for simplification and convenience in shops and tabletop businesses, enhancing revenue mobilisation for national development.
With a resolve to strengthen feedback mechanisms, collaborate with the private sector, and use data-driven insights to enhance revenue collection and compliance, the GRA sees itself not only as a revenue collector but also as a partner in national development.
This determination is further deepened by the quest to build a culture where compliance is not feared, but embraced, and where paying taxes is seen as a patriotic contribution to national development.
Demystifying the Modified Taxation Scheme (MTS)
Is this a new tax? Certainly not. This innovation is a form of Personal Income Tax for persons working in the informal sector of the economy, including plumbers, electricians, hairdressers, seamstresses and tailors, mechanics, air conditioner technicians, food vendors, etc.
Who qualifies to pay tax through the MTS?
Small businesses and individuals qualify to register for the MTS if they are Ghanaian residents, earn income only from businesses (not employment), and from sources within Ghana’s shores, and are not registered for VAT.
Categories of the Modified Taxation Scheme
There are three categories to suit different business sizes:
- Presumptive Tax Based on Instalment (PTI). This category is for businesses with average annual sales not exceeding GH¢20,000 over three consecutive years. In this category, a business or individual pays a fixed tax amount based on income level and type of business activity
- Presumptive Tax Based on Turnover (PTT). This category is for businesses or individuals with annual sales of more than GH¢20,000 but not exceeding GH¢500,000. In this category, an individual or business pays a flat rate of 3 per cent on total annual sales (turnover).
- The third category is the Modified Cash Basis (MCB) classification, which applies to taxpayers who do not qualify for presumptive taxes (PTI and PTT).
It works by enabling the taxpayer to pay tax only on profits on earnings, after deducting all allowable business expenses.
Who Does NOT Qualify for Presumptive Tax (PTI/PTT)?
The GRA encourages professionals with formal qualifications (e.g., Lawyers, Engineers, and Accountants), owners of multiple businesses or business outlets, partners in a registered business partnership, and individuals who choose to opt out voluntarily, to instead register under the Modified Cash Basis (MCB) category and honour such tax obligations.
What is needed to register for the MTS?
Registration for the MTS is quick and easy, with the taxpayer required to provide a Ghana Card (National ID), Ghana Post GPS Digital Address, Phone Number, Basic Sales Information, and a Business Registration or Permit (if available).
How to register for the MTS
The GRA has made it easier for potential taxpayers and individuals to register through any of these methods:
The MTS has been unified into a mobile application, available for download from the MTS Taxpayer App on the Apple App Store or Google Play Store.
Registration can also be done through in-person visits to the nearest GRA Office or Taxpayer Service Centre for assistance, or through the services of a GRA Field Officer, which enables direct registration by a field agent, and/or via trade Associations and Unions.
How to Pay Taxes using the MTS
The GRA offers convenient payment options, including a dedicated USSD Code: *880#, on mobile phones, or by paying directly via the Mobile Money wallet linked to the MTS Taxpayer Mobile App.
Filing Yearly Returns
At the end of the year, the Authority has made it possible for a taxpayer or individual to fill in a form in the MTS Taxpayer’s App with details of actual sales for the period.
This process, called Filing a Return, is critical, as it helps the GRA make a fair assessment of tax situations and ensures that taxpayers are in good standing.
With this year’s revenue collection already in the second quarter, the MTS is certainly the surest bet to increase informal sector tax compliance to meet the GRA’s quest and target to mobilise GH¢230.13 billion.
Under the leadership of Anthony Sarpong, the GRA, which is considered a human-centred Authority, sees taxpayers as stakeholders at the heart of the quest to reform and drive transformation in revenue mobilisation.
The GRA is committed to enforcing fairly, providing clarity, avoiding arbitrary decisions and improving service delivery to its stakeholders.
With the MTS, the Authority counts on all businesses, citizens and residents to ensure voluntary compliance, and also considers the GRA as a collaborative partner, which will, however, not spare businesses and individuals that seek to undermine its statutory mandate and integrity.
The GRA will keep to its mandate of educating all citizens about the various taxes, honouring such tax obligations, and enabling us all to build the Ghana we want together.
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Elsie Appau-Klu is a lawyer and Technical Advisor to the Commissioner General of the Ghana Revenue Authority.
She also serves as the National Coordinator for the Sustained Tax Education Program and as Chair of the Modified Taxation Scheme Implementation Committee.
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DISCLAIMER: The Views, Comments, Opinions, Contributions and Statements made by Readers and Contributors on this platform do not necessarily represent the views or policy of Multimedia Group Limited.
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