Revenue measures not enough to address shortfalls — IFS
The Institute of Fiscal Studies (IFS) has said that measures outlined in the 2018 budget statement are not enough to tackle the revenue shortfalls recorded this year.
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The 2018 budget announced some revenue measures, which include the review of the suspense regimes; implementation of the excise tax stamp policy; extension of the requirement to produce tax clearance certificates for large private sector contracts; and improving property rate collection, but a Senior Economist from IFS, Dr John Kwakye, told the Graphic Business that there were many more measures that the government could have introduced to mobilise enough revenue.
“We are not talking about increasing tax rates because they are already high, but we are talking about widening the tax net,” he said.
He said revenue mobilisation had become very critical for the government because it had constrained its ability to spend; and was, therefore, the institute was expecting comprehensive measures to deal with the challenge.
“At our pre-budget forum, we suggested a whole lot of measures that the government could use to increase revenue mobilisation because that was the most critical issue for this year and going forward.
Because they couldn’t raise enough revenue, they cut expenditure drastically and that is not good for the growth of the economy,” he noted.
“Moreover, the failure to spend feeds back into the revenue projection because if the economy does not pick up, you will not be able to generate enough revenue; so we suggested a host of measures that could be used to increase revenue mobilisation,” he pointed out.
The 2018 budget indicated that total revenue and grants for the period amounted to GH¢28,429.2 million, equivalent to 14.1 per cent of gross domestic product (GDP) compared to a target of GH¢31,346.4 million (15.5 per cent of GDP). Although the outturn is 9.3 per cent below the budgeted target, it represents an annual growth of 16.2 per cent compared to 4.1 per cent during the same period in 2016.
Proposed measures
Dr Kwakye indicated that one area that the government needed to take seriously in terms of revenue mobilisation was the informal sector, stating that: “There is a lot of room there and we need to find innovative ways to tax them.”
“There are tax experts that can bring innovative ideas and leverage on new technologies to get into the informal sector, and the government has to look at this option,” he mentioned.
He said another area which the government could have also looked at was a review of the mining stability agreement which was signed between the government of Ghana and mining companies.
He said maximising the country’s domestic revenue would require that a critical look be taken at the taxes paid by mining companies.
He also called for a major review of the concessions granted by the Free Zones Act to enable operators in the zone to contribute to government revenue.
Revenue measures
In a bid to improve domestic resource mobilisation, the Minister of Finance, Mr Ken Ofori-Atta, announced some measures yesterday.
“We will keep a balance across all sources of revenue and improve burden sharing across taxpayers using the most equitable and efficient administrative procedures and also make the tax system more transparent and fair,” he pointed out.
He said the government would create fiscal space by reducing budget rigidities.
“In this light, the Earmarked Funds Capping and Realignment Act was passed this year to cap all earmarked funds to 25 per cent of tax revenues to free resources for priority programmes,” he stated.
In an attempt to broaden the tax base to rope in more taxpayers into the tax net, he said the National Identification Scheme, the National Digital Addressing System, Tax Identification Number System and the Presumptive Tax System, among others, would significantly contribute to the broadening of the tax base.
He said it would also improve tax compliance through the review of suspense regimes, special audits, use of fiscal electronic devices, implementation of the excise tax stamps and the implementation of common reporting standards for the exchange of information, among others.
“We will also strengthen the design and administration of property taxes; examine the design of our VAT system, address significant policy shortcomings and overhaul the exemptions system to curtail large revenue losses which occur due to special regimes, reduced tax rates and other exemptions which do not serve social or economic purpose and are exploited by insiders,” he indicated.