DOI: 10.11648/j.ajasr.20261203.15 ISSN: 2471-9730

Bridging Ghana’s Tax Gap Through Licensure and Formal Recognition of Informal Labour: A Human Development Imperative

Michael Sarfo-Kantanka
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Ghana's economy is fundamentally dualistic, characterized by a vast, productive informal sector and a narrow yet heavily burdened formal sector. The few in the formal sector continue to bear a huge tax burden as compared to those in the informal sector who actually form our majority workforce base. According to official statistics, approximately 80 percent of employed persons operate informally, yet this sector contributes only 27.4 percent to GDP and an estimated less than 5 percent to total tax revenue. This structural dichotomy creates an unsustainable fiscal model and perpetuates significant human development deficits, including lack of social protection, precarious work, and constrained productivity. This paper moves beyond conventional tax enforcement narratives to propose a transformative, incentive-based licensure regime for informal trades. By integrating formal recognition with tangible benefits such as access to social security, financial services, and market opportunities, this model seeks to convert economic informality into structured economic citizenship, consistent with internationally recognized principles of equity, productivity, and decent work. It critiques current revenue collection strategies, proposes a licensure-benefit package, and offers a phased implementation roadmap. Evidence from neighbouring West African countries gathered shows that successful formalization depends more on building trust and creating attractive incentives than on coercive enforcement. The licensure framework is presented not merely as a revenue tool, but as a coherent strategy for inclusive growth, skills development, and equitable burden-sharing.

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