No need for new taxes: Individuals and businesses are too tired to pay more – Experts
THREE economic experts have noted that the country does not need new tax handfuls or tax hikes to shore up revenue and help stabilize the economy.
They said what was needed was increased tax compliance, efficient and effective revenue mobilization strategies and aggressive sealing of leaks to help shore up revenue and relieve the economy of the current burden.
Consequently, economists Dr Sam Ankrah of the Africa Investment Group, Professor Godwin Alufar Bokpin of the University of Ghana Business School (UGBS) and Dr Said Boakye of the Institute for Fiscal Studies told Graphic Business in separate talks that ongoing negotiations with the International Monetary Fund (IMF) for a Fund-financed program must rule out new tax handles or hikes on existing ones.
Beyond being an ineffective strategy, experts said consumers and businesses were too tired of current challenges that increasing tax brackets or introducing new ones would be “fatal”.
The three shared their thoughts on the revenue mobilization strategy that should be adopted to help pull the economy out of the current difficulties.
sharing the burden
The country applied for a Fund-financed program in July after the currency suffered a sharp depreciation and rising prices hit a new high.
Since then, two IMF teams have visited and held discussions with the government, after which both sides assured that the first of a two-tier deal for a bailout program would be concluded by the end of the year. ‘year.
While this is a source of relief for the economy, many worry about the repercussions of the impending fiscal consolidation exercise that characterizes every IMF program.
In recent times, Finance Minister Ken Ofori-Atta has also urged Ghanaians to prepare for burden sharing as a way to help stabilize the fiscal situation.
Sharing his thoughts, Dr Ankrah, who is also a Fellow of the Institute of Chartered Economists Ghana, said that while burden sharing was inevitable, it should not be limited to tax increases or the introduction of new taxes.
He said any attempt to bolster revenue generation through new taxes and/or increases to existing taxes would be “fatal for an already struggling economy and struggling businesses”.
He said ensuring effective tax compliance was what the country needed right now to help raise the tax-to-gross domestic income (GDP) ratio from the current 13% to almost around 20%, like in other jurisdictions.
“We have leaked too much of what is owed to the state because we are simply not efficient in collecting taxes.
“I don’t understand why these days our tax collectors are going to inspect the books of corporations and businesses to see if they are tax compliant,” Dr Ankrah said.
He said there was a need for the Ghana Revenue Authority (GRA) to fully automate its processes to help reduce the human element.
In line with the need for automation, Dr Ankrah said the GRA would improve tax collection if it replaced the physical affixing of tax stamps on excise goods with an automated system.
“Now people are going to other countries to print higher quality rolls of tape and put them on drinks in bottles and cans apparently to show that the taxes have been paid, but that’s not the case” , did he declare.
The Economist said there was a need for the GRA to use encrypted codes that would fully disclose all necessary product information.
This, he said, would ensure, among other things, that the GRA collected what was owed to the state.
Widen the tax net
For his part, Professor Bokpin said that while raising incomes was essential to stabilize the economy, the introduction of new taxes was unnecessary as the country had more than enough tax handles.
“What we need is effective and efficient tax compliance,” he said.
He said there were fewer individuals and institutions paying taxes and they should not be burdened more simply because of their ability to pay.
He said the government needs to effectively introduce and implement an effective tax compliance system that allows many eligible taxpayers to pay.
Professor Bokpin wondered why the Tax Exemption Act had not yet been implemented despite the many financial challenges facing the economy.
He said political interference in the system that allowed only a few to circumvent tax structures must end with immediate effect if the government was to make any inroads into its collections.
IFS’s Dr Boakye said he did not expect the IMF program to result in new taxes or hikes in existing handles.
Instead, he said he expected the program to focus on increased tax filing compliance.
“The IMF should ask the GRA to be a bit more aggressive. They should strengthen oversight of the GRA in setting fiscal targets and encourage a stronger link with the Ministry of Finance,” the economics researcher said.
“They can also review tax benefits and make them more productive. They may allow some changes to the tax regime for the mining sector, but I doubt they have the will to call for a complete overhaul,” Dr Boakye said.
He also called on the IMF to introduce foolproof mechanisms that would reduce corruption and waste in the system to help save the state money.