'Impose windfall taxes on thriving sectors to increase revenue' - IEA

The Institute of Economic Affairs (IEA) has recom­mended that the next gov­ernment should contemplate the implementation of windfall taxes on thriving sectors such as extractives, banking, telecom­munications, and Information and Communication Technology firms in order to bolster the nation’s tax revenue.

The economic think-tank said, this measure was essential for improving the country’s revenue collection and alleviating the government’s reliance on borrowing, which was exacerbat­ing the national debt crisis.

Ghana’s tax to Gross Domestic Product is currently estimated at 14 per cent, which is below the Sub-Saharan average of 18 per cent, thus forcing the government to borrow to meet its revenue needs.

IEA in its later paper titled ‘Policy priorities for the incom­ing government,’ explained that, revenue measures aimed at stemming losses by closing the several loopholes in the tax system, including those relating to trade mis-invoicing, property tax under-collection, transfer pricing, money laundering, tax evasion, tax fraud and tax system ineffi­ciencies should be strengthened by the next administration.

“Fiscal consolidation mea­sures consisting of an appropri­ate mix of revenue-enhancing and expenditure-rationalisation measures to rein in fiscal defi­cits," the IEA stated must be introduced by the next govern­ment.

The economic think-tank further said must expenditure measures aimed at reducing re­current spending such as emol­uments and spending on goods and services must be initiated, adding that it was important for the next administration to reduce the incidence of inflated costs under fraudulent procure­ment practices while increasing efficiency and reducing waste in spending.

“Reducing recurrent expen­diture would create room for increasing capital expenditure (CAPEX) from current low levels of 4-5 per cent to over 10 per cent over the medium term to spur economic growth,” said IEA.

In addition, it noted that the next administration should reduce the current fiscal rule of 5 per cent of deficit/GDP ceiling to a tighter rule of 3 per cent in conformity with the ECOWAS criterion.

“Also, a debt/GDP ceiling of 60 per cent, deemed the sustain­able level for Ghana and other countries with similar World Bank Country Policy and Institu­tional Assessment (CPIA) scores, should be introduced in the FRA to help attain and maintain debt sustainability over the medium- to long-term,” IEA stated.

Moreover, the economic think-tank indicated that the next government should establish an independent Fiscal Council with the mandate to evaluate and monitor fiscal policy, among oth­er functions, to help foster fiscal discipline and fiscal sustainability.

The external economic fac­tors coupled with the domestic economic management short­comings had been a contributory factor to the country’s economic challenges.

In particular, IEA said the huge expenditure outlays on several government flagship pro­grammes and a bloated govern­ment in the face of constrained revenues led to wide fiscal gaps that were financed through large-scale borrowing, especially on the Eurobond market, causing the public debt to escalate to unsus­tainable levels.