For Ghana to achieve its aim of developing beyond aid, strong performance of domestic revenue is crucial, Vice-President Mahamudu Bawumia pointed out here on Wednesday.
Opening a two-day conference of the 11 G20–Compact of Africa (CWA) member-countries, the vice-president listed challenges Ghana faced in domestic resource mobilization.
These ranged from the preponderance of hard tax sectors; erosion of domestic tax basis; tax compliance issues; profit shifting and base erosion by corporate tax payers; widening net of tax exemptions and exemption crib and tax competition in resources taxation.
Bawumia blamed the problem partly on the largely informal nature of the African economy.
“Notwithstanding Ghana’s effort in domestic revenue mobilization, there are indications that the revenues generated at some 17 percent of GDP (Gross Domestic Product) are below potential and also lower, compared to our peer Middle Income Countries. But let’s get practical. We all know that for many African countries, the informal sector constitutes a very large part of the economy. Between 30 percent and 60 percent of our economies are informal.
“Under the circumstances, taxing transactions become difficult, if not impossible, since there are no records of such transactions.
“If 60 percent of your economy is an underground economy, now you have to generate revenue, how can you tax these transactions that you have no record of?”Bawumia postulated.
He said the government of Ghana had been taking steps through digitization of the revenue system and the yet to be launched National Identification system to formalize the economy.
“Judging from our history and our vision for the future, there is no doubt that we need to rethink how we develop as a country. It has become obvious that we need to be more efficient and effective in managing our resources to ensure rapid economic growth and transformation. Going beyond aid is an inevitable conversation, and we can choose to confront it now or postpone it to our peril,” Bawumia cautioned.
The conference, jointly organized by the International Monetary Fund (IMF) and the African Center for Economic Transformation (ACET), is being attended by Benin, Morocco, La Cote d’Ivoire; Egypt, Ethiopia, Rwanda, Togo, Senegal, Tunisia Guinea and Tunisia.
Prof. Kingsley Yaw Amoako, President of ACET, reiterated the need for efficient ways of maximizing domestic revenue by developing countries.
“As we all know, revenue mobilization in most developing countries is not keeping pace with development goals or increasing fiscal pressures. This issue is of paramount importance for Ghana and its long-term development strategy, as well as for all countries gathered here today,” he stated.
In his opening remarks, Kenneth Ofori-Atta, Ghana’s finance minister, alluded to a study by Global Financial Integrity (GFI) which estimated that between 1960 and 2012, Ghana lost about 40 billion US Dollars through trade mis-invoicing.
“There is no denying the fact that our future as a country depends on the quantum of taxes we are able to raise domestically. No nation has ever developed depending solely on the benevolence of others. Aid must be a supplement to our domestic efforts,” Ofori-Atta stressed.
The minister hinted that new tax measures would be presented to parliament during the Mid-Year Review in July. Enditem