The Price of Simplicity: Skewed and Regressive Taxation in Accra’s Informal Sector

International and domestic policymakers often hope that informal economies represent an ‘untapped goldmine’ for government coffers. However, growing evidence suggests that these claims are often severely overstated, ignoring the payments that informal sector operators already make, overestimating their ability to contribute more, and failing to account for the often-high costs of collection.

This paper examines taxation patterns in the informal sector in Accra, Ghana. Using a novel dataset of 2,700 informal enterprises in the Accra metropolitan area, we present the first account of the tax burdens of informal enterprises that is representative of Accra’s informal sector, allowing us to verify common assumptions about the distributive impacts of taxation.

Summary of ICTD Working Paper 195.