Professor Godfred A. Bokpin, a Fellow of IMANI Centre for Policy and Education, has urged government to rationalise the many tax exemptions that are granted multinational companies.
Government should also explore and deepen efforts in mobilizing domestic tax revenue and avoid tax exemptions.
Speaking at a lecture organized by IMANI Centre for Policy and Education, Prof Bokpin said the country was losing more revenue on tax exemptions to multinational businesses, who were in tax payment positions.
He spoke on the topic: “Is Ghana’s Debt Sustainability under Serious Threat after the International Monetary Fund Programme?”
The country’s total debt at the end of 2018 was GH¢ 198 billion as at March 2019, which is 57.5 per cent of Gross Domestic Product.
He said the country needed to develop strategies for an inclusive economy growth that would integrate the oil and gas sector and other sectors to strengthen the public investment process to manage the country’s debts.
He said over the years, the country had struggled to manage its debts because of the inability to generate the desired direct taxes, which had become a bane to development.
The Professor said the country’s tax collection ability did not work well in elections period because of the interest to satisfy all sectors of the economy for fear of losing votes.
He said “in the past, it took two years for a government to clear the country’s total debt upon assumption into power, but now, it takes an average of four years, attributing the situation to indiscipline fiscal spending during elections”.
He called on Ghanaians to adopt a monitoring mechanism to ensure that governments did not spend beyond its limit.
The tax to GDP ratio in Ghana is 17 per cent compared with a 19.1 per cent average in Africa, 22.8 per cent in Latin America. Investment in the operations of the Ghana Revenue Authority (GRA) hold the key to enhanced domestic revenue mobilisation, he said.
Professor Bokpin said it was good for a country to borrow, but the money must be used for its intended purpose and not on consumption of goods and services and employee’s compensation.
He called on government to ensure that the cost of fiscal consolidation was evenly distributed to all and sundry by expanding social safety net programmes towards restoring the real income of the poor.
“Achieving sustainable fiscal consolidation have been constrained by revenue challenges and expenditure rigidities”.
He urged government to act prudently not to hide under the shadow of rebasing of the economy to borrow more, which did not necessarily increase cash flow to the country’s growth.
He said the country had a potential of generating up to GH¢ 89 billion in taxes to mitigate the debt to the Gross Domestic Product (GDP), but the current projection was GH¢ 45 billion, urging the GRA to deploy mechanisms to close the gap.
Prof Bokpin urged government to deal with trade mis-invoicing, which had denied the country of huge sums of revenue.
Ghana loses more than $2 billion through trade mis-invoicing, which is 67 per cent of the recent Eurobond issue and 70 per cent of the budget deficit for 2019.