‘Impose windfall taxes on thriving sectors to increase revenue’
The Institute of Economic Affairs (IEA) has recommended that the next government should contemplate the implementation of windfall taxes on thriving sectors such as extractives, banking, telecommunications, and Information and Communication Technology firms in order to bolster the nation’s tax revenue.
The economic think-tank said, this measure was essential for improving the country’s revenue collection and alleviating the government’s reliance on borrowing, which was exacerbating the national debt crisis.
Ghana’s tax to Gross Domestic Product is currently estimated at 14 per cent, which is below the Sub-Saharan average of 18 per cent, thus forcing the government to borrow to meet its revenue needs.
IEA in its later paper titled ‘Policy priorities for the incoming government,’ explained that, revenue measures aimed at stemming losses by closing the several loopholes in the tax sys
tem, including those relating to trade mis-invoicing, property tax under-collection, transfer pricing, money laundering, tax evasion, tax fraud and tax system inefficiencies should be strengthened by the next administration.
“Fiscal consolidation measures consisting of an appropriate mix of revenue-enhancing and expenditure-rationalisation measures to rein in fiscal deficits,’’ the IEA stated must be introduced by the next government.
The economic think-tank further said must expenditure measures aimed at reducing recurrent spending such as emoluments and spending on goods and services must be initiated, adding that it was important for the next administration to reduce the incidence of inflated costs under fraudulent procurement practices while increasing efficiency and reducing waste in spending.
“Reducing recurrent expenditure would create room for increasing capital expenditure (CAPEX) from current low levels of 4-5 per cent to over 10 per cent over the medium term to spur economic growth,” said IEA.
In addition, it noted that
the next administration should reduce the current fiscal rule of 5 per cent of deficit/GDP ceiling to a tighter rule of 3 per cent in conformity with the ECOWAS criterion.
“Also, a debt/GDP ceiling of 60 per cent, deemed the sustainable level for Ghana and other countries with similar World Bank Country Policy and Institutional Assessment (CPIA) scores, should be introduced in the FRA to help attain and maintain debt sustainability over the medium- to long-term,” IEA stated.
Moreover, the economic think-tankind icated that the next government should establish an independent Fiscal Council with the mandate to evaluate and monitor fiscal policy, among other functions, to help foster fiscal discipline and fiscal sustainability.
The external economic factors coupled with the domestic economic management shortcomings had been a contributory factor to the country’s economic challenges.
In particular, IEA said the huge expenditure outlays on several government flagship programmes and a bloated government in the face of constrained revenues led to wide fiscal gaps that were financed through large-scale borrowing, especially on the Eurobond market, causing the public debt to escalate to unsustainable levels.
STORIES: KINGSLEY ASARE
