Block revenue leakages instead of imposing more taxes – Economist

Economist Prof Newman Kusi has deplored the manner in which the Government is imposing taxes on services in Ghana, and suggested that all revenue leakages be blocked as part of fund mobilisation efforts.

“I think one has to be very careful in imposing taxes on almost every service or every activity in this country,” Executive Director of the Institute of Fiscal Studies (IFS) warned in an interview with STARR NEWS in relation to the Government’s imposition of a 17.5-percent VAT on fuel prices.

The special petroleum tax bill was passed into law by a one-sided parliament Wednesday after finance Minister Seth Terkper presented the 2015 budget and economic statement to the House.

Under the new arrangement, premium (petrol) will see a rise of 3.04% and kerosene 2.85%. The price of Premix will remain the same.

The new tax is expected to rake in GHc1.541 billion between November, 2014 and December, 2015.

The former Advisor in the office of the Finance Minister, however, said there are so many ways the Government could raise that amount without needing to impose new taxes on goods or services.

“If Government wants to close the fiscal deficit, there’s nothing wrong with our tax policy, what is wrong with our tax system is the tax administration. Government must find effective and efficient means of closing the leakages in the tax systems.”

“Everybody knows the leakages from customs, the leakages from the bonded warehousing facilities, the leakages from transit goods, the leakages from under declaration of imports, the leakages in auctioning of confiscated imported goods and all those sort of things, Government can easily get that GHc1 billion if they looked at that,” he said.

As a second solution, Prof Kusi said the Government must start living within its means. “Number two, we are living in a country where we are living beyond our means. Government needs to take a drastic look at its own expenditure,” he advised.