Former Finance Minister and Presidential Adviser, Seth Terkper, has urged the government to prioritize the use of stabilisation funds during economic downturns instead of resorting to the habitual introduction of new taxes.
This practice, he says, could further distort Ghana’s tax system and burden already stretched taxpayers.
The former finance minister made this call on Monday at the official launch of his new book, “Value Added Tax in Africa: The Ghana Experience”, which chronicles Ghana’s journey with VAT implementation and broader fiscal reforms.
Speaking at the official launch, which had a section of policymakers, tax professionals, academics, and the media gathered at the Ghana Academy of Arts and Sciences in Accra, he stressed that fiscal crises should be managed through pre-designed buffers, not knee-jerk tax hikes.
The Stabilisation Fund as a Shock Absorber
Seth Terkper, who played a pivotal role in the establishment of Ghana’s Stabilisation and Heritage Funds during his tenure as Minister for Finance, believes the funds must be shock absorbers for the country.
The funds, he says, must cushion the country during fiscal shocks such as commodity price crashes or global recessions.
However, he bemoaned the fact that rather than using these funds in moments of crisis, successive governments have often taken the “easy route” of imposing new levies or resurrecting old taxes under new names, worsening the complexity of the country’s tax system.
“When the VAT was introduced, it actually replaced a lot of consumption taxes. But many of them have returned in the form of levies,” Terkper observed. “This creates distortions and affects compliance.”
The Case Against New Taxes in Times of Crisis
The current presidential adviser rather cautioned that the frequent introduction of new taxes not only imposes administrative burdens on the Ghana Revenue Authority (GRA), but also erodes public trust, reduces tax morale, and encourages evasion.
Moreover, he noted that such approaches often end up being regressive, disproportionately impacting low-income earners and small businesses, many of whom are still recovering from pandemic-era shocks and ongoing inflation pressures.
“When we have issues and difficulties, that’s where we should fall back on mechanisms like the stabilisation fund so that we are not tempted to use the tax. You know, to introduce new taxes, it then makes it difficult to administer and make it difficult for taxpayers to comply with. So, that’s the appeal I’m making,” he suggested.
For Terkper, the call for a stabilisation fund in times of crisis is not just about preserving the integrity of the tax system. It’s also about long-term sustainability and public confidence. According to him, when governments show restraint and use funds wisely set aside for rainy days, it builds credibility with citizens, investors, and development partners alike.
Analysts say the potential benefits of the proposal is enormous. They say this could help to reduce borrowing in times of crisis and a more stable and predictable tax regime
Compliance and trust in tax administration is expected to increase while the country is encouraged to build buffers against global economic shocks
