Working Paper 195

International and domestic policymakers have long assumed that informal economies represent an ‘untapped goldmine’ for government coffers. While recent research has highlighted that many informal businesses do pay a range of formal and informal taxes, there has, to date, been little systematic account of their tax burdens. Using a novel dataset of 2,700 informal enterprises in the Accra metropolitan area, we explore the nature and impact of taxation in the informal sector. We find that the majority of informal sector operators pay a range of taxes and fees, which together amount to a significant burden, especially for low earners. These payments are skewed and regressive. Two additional findings emerge in relation to the structure of these taxes. First, the incidence and burden of tax payments is strongly correlated with visibility to the state. Second, taxes and fees are highly regressive, with lower-earning operators paying significantly more in relation to their earnings. These findings have important implications for efforts to tax informal businesses in low- and middle- income countries. The regressivity of efforts to tax the informal sector is often framed as a price worth paying for simplicity. Our study provides both an estimation of this ‘price’, and an underlying argument for collecting this kind of data on taxation of informal enterprises in order to assess real policy impacts.


Nana Akua Anyidoho

Nana is an Associate Professor at the Institute of Statistical, Social and Economic Research (ISSER) and the Director of the Centre for Social Policy Studies (CSPS), both at the University of Ghana. Her research areas focus on social policy and social development.

Max Gallien

Max Gallien is a Research Fellow at the ICTD. His research specialises in the politics of informal and illegal economies, the political economy of the Middle East and North Africa and development politics. He completed his PhD at the London School of Economics. Max co-leads the informality and taxation programme with Vanessa, as well as the ICTD’s capacity building programme.

Mike Rogan

Michael Rogan is an Associate Professor in the Department of Economics and Economic History and the Neil Aggett Labour Studies Unit (NALSU) at Rhodes University. Since 2011 he has been a research associate in the global research and advocacy network, Women in Informal Employment: Globalizing and Organizing (WIEGO). He holds a PhD and a Master’s degree in Development Studies and a Bachelor of Arts in International Studies from the University of Washington in Seattle. His research interests include: gender, informal employment, health, poverty and inequality, and education and skills development.

Vanessa van den Boogaard

Vanessa van den Boogaard is a Research Fellow at the ICTD and a Senior Research Associate at the Munk School of Global Affairs and Public Policy at the University of Toronto. She completed her PhD thesis on informal revenue generation and statebuilding in Sierra Leone, and has ongoing research on the topic in the Democratic Republic of the Congo and Somalia. Vanessa leads the ICTD’s new programme on civil society engagement in tax reform and co-leads the research programme on informal taxation.