Rising public debt challenges Ghana Beyond Aid agenda
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 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.
“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.
0 comments: