Adnan Adams Mohammed
The ever ballooning public debt presents a threat to the achievement of the Ghana Beyond Aid agenda as targeted by President Nana Addo Dankwa Akufo-Addo’s administration.
The country, as it stands now, spends 40 percent of what it collects in tax revenues to service its debt.
That leaves little or no money at all for capital expenditure, thereby holding back the growth of the economy.
The Head of Programmes at the Institute of Fiscal Studies (IFS), Mr Nicholas De-Heer believes that, Ghana Beyond Aid in reality was not a policy choice. He expressed worry about the country’s domestic revenue mobilisation, saying that it was the lowest in the sub-region.
“I think that is an area we have to pay attention to if we are going to make Ghana Beyond Aid happen,” he said.
Indeed some tax experts have said if the government is able to implement, effectively and efficiently administer tax policies, it could rake in much more revenue.
Mr Ali Nakyea, a renowned tax consultant and lecturer at Ghana Law School has proposed a five point strategy which would help the government implement its home grown policies as a way of achieving the objective of “Ghana Beyond Aid”
He said effective tax administration and economic policies will yield the ‘magic results’ of Ghana Beyond Aid.
The tax expert outlined a five tax administration strategies which included: government and other institutions ensuring that everyone who are required to pay tax comply with the law and pay their taxes; all leakages of revenue through illicit financial flows, tax evasion, under invoicing, wrongful exemptions among others should be curtailed to shore up government revenue; corruption should be addressed by recovery of the sums involved before punishment. This can be started with prosecuting to recover monies from those that the Auditor-General has already issued Surcharges to and they have not responded.
He also proposed a review of some of the tax exemptions in contracts and agreements; and keeping tax regime certain and stable to ensure steady growth and flow of domestic resources to replace aid.
Aside these tax administration policies, there is the need for a national agenda. He quizzed that, “what is the policy difference between forging Home Grown Policy approach of the NDC (to avoid imposed austerity packages) and Ghana beyond aid approach of the NPP?
He is of the view that, the country should look at policies and their implementation from a nationalistic perspective and not political gimmicks to score political points while, no results are being achieved.
“Indeed with this, Ghana would definitely not need foreign aid any longer”, he stressed.
Consequently, CUTS International Ghana is calling on government to enhance domestic revenue collection so it can reduce the short-term borrowing.
CUTS Ghana, a research and advocacy policy think tank in Accra is of the view that, although domestic revenue mobilization has gone up, yet there are a lot of economic activities in the country that are not taxed.
Due to the huge gap between government’s revenue and expenditure, all governments have had to rely on borrowing to meet the funding gap. However, huge borrowing exposes the country to high debt servicing and this leaves nothing for infrastructure development.
Tax to GDP ratio in Ghana is 17%; compared with a 19.1% average in Africa, 22.8% in Latin America and 34.3% in the OECD. Investment in the operations of the Ghana Revenue Authority (GRA) holds the key to enhanced domestic revenue mobilization.
According to available statistics, Ghana collects approximately 55% of its taxes from indirect taxes which include VAT, excise duties and customs duties, which have been found globally to be regressive, and around 30% of its tax revenue is from VAT. This regressive nature of taxation means that the poor pays the same effective tax rate like the rich. This worsens the plight of the poor and vulnerable who are supposed to be protected by government’s policies under social protection.
From this backdrop, the country coordinator for CUTS Ghana Mr. Appiah Kusi Adomako is urging the government to explore and deepen its effort in raising more revenue from progressive taxes.
He was emphatic that economic inequality is on the increase in Ghana, which is also impacting on the fight to reduce extreme poverty.
“Large parts of the Ghanaian population remain locked out of the gains from growth. This is compounded by large inequalities which also exist within Ghana based on region and rurality. It is crucial that government works to address this spiraling inequality” he opined.
Launching the advocacy campaign on fiscal policies to address inequalities in Accra, last week, Mr. Adomako said, taxation is a matter of taking money and redistributing it across the country. Such tax and spend is the duty of every government. When done properly, it reduces inequalities. A good tax system is progressive.
The highlights of research conducted jointly by CUTS and Oxfam indicated that, tax exemptions and deductions to multinational firms in Ghana amount to an average of US$1.3 billion yearly. This represents two-thirds of the education budget and 80% of the health budget.
Tax experts have cautioned of how the country is bleeding of millions of dollars annually from tax agreements with some countries.
Ghana has signed treaties with 12 countries, which set low rates for the taxes Ghana can deduct up front from companies headquartered in these countries before they can start shifting profits out of Ghana, and this therefore reduces Ghana’s tax revenue.
These have had less effect on reducing tax revenue than in other countries, because Ghana has set very low withholding tax rates (between 8% and 20%) which are generally similar to the ceilings in the treaties. This means, Ghana has deprived itself of withholding taxes.
