Financial Analyst and Banking Consulting, Dr. Richmond Atuahene says the reset agenda of the new government will not be complete without a conscious effort to enhance the country’s domestic revenue mobilization.
The Financial Analyst says there is an urgent need for the government to deliberately ensure the improvement in the country’s tax-to-GDP ratio which is far below its peers in Sub-Saharan Africa (SSA) and Lower Middle Income(LMIC) status.
Ghana’s tax-to-GDP ratio hovers around 13.8% which is far below the SSA average of 18.4% and LMIC average of about 17%. The inefficiencies in mobilizing domestic revenue are the main factors preventing successive governments from nearing the tax-to-GDP target of 18-20% by 2027.
The impact of this low domestic revenue is experienced in the inability of the country to support its long-term growth and poverty reduction programs as confirmed by the World Bank. Moreover, the country cannot effectively service its high debt overhang leading to a ballooning public debt stock.
With a new dawn for the country’s economic governance, the new NDC administration has committed to resetting the economy. The agenda to reset is aimed at a comprehensive overhaul addressing the structural bottlenecks and restoring macroeconomic stability which will stimulate economic growth. This includes a commitment to fiscal discipline, policies to enhance the business environment, support for SMEs, renegotiating the IMF bailout, and enhanced productivity among others.
Considering this new focus, Dr. Atuahene says an improved mobilization of domestic revenue is very critical in ensuring the success of these plans and more importantly, at a time when the country is under an IMF Extended Credit Facility program.
In a research paper copied to The High Street Journal, the financial analyst argues that the state of the economy where inflation is soaring, and the continuous depreciating trend of the local currency among others makes it imperative for drastic revenue enhancement measures.
“Enhancing Ghana’s revenue mobilization through a reduction in the widespread tax exemptions and reliefs as well as critically diversifying the revenue streams are therefore imperative in the current economic context of the country’s debt overhang, high inflation, persistent currency depreciation, and low economic growth,” he wrote.
Among a tall list of proposals to the new government to improve its revenue mobilization is the call to diversify revenue streams, especially the neglected property tax system due to its politicization by the two leading parties. He is calling for the depoliticization of this tax handle that can generate billions in revenue.
In addition to reforming the tax exemptions regime which is draining the country’s needed revenues, Dr. Atuahene wants the government to reform the country’s tax mobilization systems which lag behind its peers.
“Ghana’s tax policy architecture also lags the more effective systems employed by its peers. Countries such as South Africa and Kenya have adopted more progressive tax regimes with higher levies on upper-income echelons and political elites thereby harnessing a larger share of economic wealth. Conversely, Ghana’s tax structure has been less progressive over the years, with lower rates and substantial exemptions that dilute the tax base,” he remarked.
Moreover, he adds that measures must be taken to address the pervasive corruption that is milking the state’s revenue. In his view, corruption must be designated as a national crime to deter public officials from mismanaging the country’s domestic revenue mobilization. He says, “Corruption drastically reduces tax revenues, forcing governments to find other avenues for financing government expenditure, including borrowing.”
He further calls for the retooling of the GRA with sophisticated and digitized systems that can enhance its operations while urgently reviewing its revenue streams from the mining sector.
The financial analyst believes with these reforms and many others, the new government can efficiently mobilize adequate domestic revenue to undertake the reset agenda and improve the socio-economic lives of Ghanaians.
