The Executive Director of the Institute of Fiscal Studies (IFS), Professor Newman Kwadwo Kusi has disclosed that Ghana’s porous tax regime has hindered its ability to raise adequate funds to support its development, ABC News can report.
The Economist explained that as a result of the low revenue generation, the country relies on loans from development partners to embark on development projects.
This he says has compelled the managers of the economy to dedicate a chunk of the revenue to debt servicing, ABC News can report.
Professor Kusi bemoaned that for every GHS 1 tax revenue collected, 0.84 pesewas is used to pay debt. He noted that this menace partly accounts for the slow-paced development.
He detailed, “Tax compliance is very weak in this country, and therefore we have a problem with our tax system and tax administration; we have to critically look at it. Otherwise, whenever we want to develop anything in this country we have to go and borrow money. That is why the country’s debt has increased from GH¢9.8billion in 2008 to GH¢205billion as we speak.”
He again divulged that “If you take the interest that we pay on government debt, it is about more than 84percent of tax revenue. Which means that for every GH¢1 tax that government collects, 84 pesewas of it goes to pay interest on government debt. How can the country develop? So, I think we need to look at revenue mobilisation very critically.”
According to the IFS Executive Director, Ghana’s development will continue to be dwarfed if drastic measures are not implemented to reform the tax systems in order to increase the revenue into the national coffers.
Responding to a recent report of the Central Bank which revealed that tax revenue as of July 2019 was 6.1% of GDP down from 6.5% during the same period last year, Professor Newman said that, “we have a very big problem with our tax system. And that is why even though we have GDP of over GH¢300bn, only 12.6 percent of that is collected as tax. So your GDP can go up, but if your tax system is weak – you don’t have mechanisms for collecting the taxes – you will not get the revenue. There is a need to deal with that issue. Dealing with that issue does not necessarily mean increasing the tax; we also have to improve tax compliance.”
The report revealed that domestic revenue also decreased by 8percent in the same period.