Fiscal Policy Specialist with OXFAM, Alex Ambaabeng is urging the Ghanaian government to invest in tax infrastructure to enhance its domestic revenue mobilisation as the country begins processes to engage the International Monetary Fund (IMF) with an enhanced economic program for support.
He told Xinhua recently on the sidelines of a budget forum organised by the Natural Resource Governance Institute (NRGI) that the reliance of third parties by the government to collect its taxes has negatively impacted on the revenue that has been generated over the years.
The government, he further emphasized, is unable to make accurate projections of its revenue, and hence has dire economic consequences for the country.
He said, “I think investment in tax infrastructure is very important because we need to set the space, lay the very foundation that will help us to generate the revenue that we want,” Ampaabeng said.
“When I talk about investment in infrastructure, I am talking about investment into people, investment into systems, investment into things that will make sure that things that have to be taxed are well captured and accounted for, and therefore the government is able to make accurate projections,” the Fiscal Policy Specialist added.
According to the Ghana Statistical Service (GSS), the country’s informal sector makes up 70 percent of all economic activity, with the formal sector making up 30 percent.
The Ghana Revenue Authority (GRA), the government’s revenue collection entity, also reports that the informal sector pays 2 percent of revenue to the government while the formal sector accounts for the remaining 98 percent.
This development, according to Ampaabeng, was worrying as a greater percentage of the populace pays virtually nothing to the government, hence the need for the tax infrastructure to capture all sectors of the economy.
“It is therefore critical at this moment in the midst of our country’s challenges for the government to put in place the necessary systems to capture economic activities fairly by adding the informal sector, and that will certainly shore up what we will be generating domestically,” he suggested.
According to the budget statement and economic policy of the government of Ghana presented by Finance Minister Ken Ofori-Atta in November last year, total revenue and grants for 2022 were projected to rise to 100,517 million cedis, equivalent to 20 percent of gross domestic product (GDP), up from a projected outturn of 70,347 million cedis, equivalent to 16 percent of GDP for 2021.
Total expenditure, including arrears clearance, was estimated to be 137,529 million cedis, or 27.4 percent of GDP. The estimate for 2022 represents a 23.2 percent increase over the projected output of 111,645 million cedis, or 25.3 percent of GDP for 2021.
The key drivers of expenditure growth include capital expenditure, funding of key government flagship programs including the Ghana COVID-19 Alleviation and Revitalization Enterprises Support program or “Obaatanpa”, wage bill, and interest payment.
The 2022 fiscal operations of the government resulted in an overall fiscal deficit of 37,012 million cedis, equivalent to 7.4 percent of GDP.
The country’s Finance Minister is expected to present the mid-year budget statement and economic policy of the government to the Parliament of Ghana on July 25.
Some economic analysts believe the mid-year review is going to be the toughest one for the government in recent times and are looking forward to seeing measures that will be put in place to ensure debt sustainability as the country prepares for a bailout with the IMF. Enditem