Government owes pension schemes GH¢2.63 billion as of May 2023 - Minister

Dr Mohammed Adam Amin, Minister of State at the Ministry of Finance, has informed Parliament in Accra that the government’s total indebtedness to various pension schemes as of the end of May 2023 was GH¢2.63 billion.

He said the amount comprised of Tier 1 of the Controller and Accountant General’s Department mechanised payroll GH¢1.62 billion, Tier 1 of subvented institutions GH¢188.59 million, Tier 2 of mechanised payroll GH¢808.21 million and Tier 2 of subverted institutions GH¢6.84 million.

Dr Adam Amin announced on behalf of Mr Ken Ofori-Atta, the Minister for Finance when he responded to an urgent question asked by Mr Haruna Iddrisu, Member of Parliament for Tamale South.

Mr Iddrisu inquired about how much was owed by the various pension schemes, including the Social Security and National Insurance Trust (SSNIT) by the government of Ghana.

“Mr Speaker, the government paid GH¢2.67 billion to various pension schemes in 2022. Between January and the end of May 2023, the government had also paid GH¢2.26 billion,” he said.

Also responding to a question from Mr Suhuyini Alhassan Sayibu, MP for Tamale North who asked the question on behalf of Mr Iddrisu whether the Ghana Revenue Authority’s 24-month contract for an amount of about $18.24 million between McKinsey & Company Inc. Ghana, achieved the overarching aim of increasing tax revenue substantially over and above the baseline of 17 per cent year on year growth.

Dr Adam Amin said that revenue mobilisation remained a challenge for the government.

He said the tax-to gross domestic product ratio averaged 13 per cent, which was lower than the average 18 per cent for the sub-region.

“Mr Speaker, unlocking the full potential of our domestic revenue mobilisation is one that is at the core of the President’s vision of a Ghana Beyond Aid,” he said.

He explained that McKinsey was engaged to support the government’s efforts to increase tax revenues over the baseline of 17 per cent year-on-year growth and other interventions to increase efficiency and effective work culture.

According to Dr Adam Amin, the overarching target of 17 per cent year-on-year growth was exceeded and the total revenue growth recorded was 28 per cent year-on-year.

“Mr Speaker, GRA’s total payment to McKinsey over the contract period of 2018-2022 was $ 12.2 million.

“In terms of performance, the collaboration between GRA and McKinsey resulted in an increase in revenue from GH¢38 billion in 2018 to GH¢75.5 billion in 2022, a cumulative average of about 19 per cent over the period,” he said.

Dr Adam Amin revealed that not only did McKinsey help the government increase its revenue, but they helped lead a cultural shift and professionalism, including the use of enhanced performance appraisal and analytical tools, which would anchor significant improvement in revenue mobilization.

“Mr Speaker, despite these very good results, and Ghana’s current tax-to-GDP ratio rising from 12.1 per cent in 2016 to 13.8 per cent at the end of 2022, our revenue performance is still one of the lowest in the sub-region.

“For context, our peer countries are collecting an average of 18 per cent while the Organisation for Economic Co-operation and Development countries are achieving about 34 per cent,” he said.

Dr Adam Amin told the House that there was evidence that Ghana had enormous capacity to double its tax revenue, and at the very minimum, be at par with its peers without introducing new taxes.

In line with such ambition, he said the government was leveraging digitalisation, including initiatives such as E-invoicing, E-VAT, E-Levy, and Ghana.gov among others to expand the tax net, eliminate leakages and close the tax gap.

“Results from the pilot phase of the E-VAT and E-invoicing, supplemented by physical monitor the ring by the staff of GRA are truly revealing.

“The initial results have emboldened us to expand the coverage to other targeted entities,” he said.