Head of Finance at the University of Ghana Business School, Prof. Godfred Bokpin has revealed that tax exemptions introduced by the ruling New Patriotic Party government is causing Ghana more loss than gain since its kick-start; the situation he says is not a good indicator of the growth of the economy.
According to him, these tax exemptions introduced by the Akufo-Addo-led government is rather increasing the country’s debt and not benefiting the public purse.
Addressing stakeholders and the media at IMANI’s public lecture on the theme “Is Ghana’s debt sustainability under serious threat after the IMF program?”, Prof. Bokpin urged government to reconsider as the high volumes of exemptions alone could reduce the country’s borrowing and its subsequent debt servicing.
According to him, if those exemptions are taken off and the Ghana Revenue Authority ensures tax compliance is improved, then the gap will eventually close which will reduce the rate at which we borrow.
“If we’re able to close the gap, there’ll be very little need to borrow then the reason we may borrow may be to do more of the rollover because part of the borrowing we do as a country is for liability management. It’s not everything that goes into project financing, a good size of that into liability management and this is what we have been doing over the years. So the good way to do this is to make sure that we improve on our tax compliance”, he said.
He said although government introduced those tax exemptions to help Ghanaians, it is rather creating problems because sufficient revenue is not collected thereby increasing our debts.
Prof. Bokpin further revealed that Ghana’s debt shouldn’t in any way be politicised as it has been something of the past but rather political parties must come together in order to find lasting solutions to the problem.
“Sometimes it may cost the government because in an election year they don’t want to offend people, they don’t want to offend businesses, they don’t want to offend citizens when it comes to tax compliance and all of that. And yet expenditure tends to rise in an election year then we go into a deficit. But the deficit has to be financed, deficit is an indication of the borrowing requirement of the government so once we continue to run deficits of the magnitude both in terms of the size, the persistence, then there’s no way we’ll be able to contain our debts”.
“ It has been a problem over the years so the point we’re trying to make is that, it’s not an NDC not NPP problem, this is Ghana’s problem way back from Nkrumah’s days. And it’s largely because as a country we have not been collecting sufficient tax revenue. And that is work, that’s a lot of work to do and that is what GRA should be doing and that is the target they should be able to have. We have a tax gap of about GHC89bn. We have to be able to close it. The exemptions are just too much and not all of them make sense. But the reality on the ground today is that Ghana is losing excessively through this tax exemptions...We cannot continue this way”, he added.
The country over the years has had some challenges with revenue mobilization in terms of raising the required taxes to match the level of economic activities.
Government last year projected to collect about ¢40 billion cedis but missed out on this target by a little over 5%.
The Country’s tax-to-GDP ratio is said to be around 12%, even though according to the Finance Minister, government should be doing about 20%.
Government in 2018 budget granted tax exemptions to some manufacturers as well as removing some nuisance taxes on some imported items including spare parts.
There have been calls on government to review the tax exemptions granted to investors and businesses, which experts say is causing it to lose more than $2 billion.
However, Finance Minister Ken Ofori-Atta is confident of meeting the end of year revenue target despite challenges with the first quarter collections.
Government ended the first quarter of this year mobilizing a little over ¢10 billion which is about ¢2 billion short of its ¢12 billion target for the first three months of 2019.
Mr Ofori-Atta insisted that some measures that they are currently implementing together with on-going reforms at the Ghana Revenue Authority (GRA) would help improve the numbers in the coming months.
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