Ghana is facing a significant tax gap, with a 61 per cent shortfall in Value Added Tax (VAT) collection, resulting in the country collecting only about 39 per cent of its potential tax revenue.
To address tax evasion and tax avoidance, efforts are underway to collaborate with the Ghana Revenue Authority (GRA) to seal loopholes and maximise revenue collection, the Deputy Minister of Finance, Thomas Nyarko Ampem, has said.
The minister explained that addressing revenue leaks could potentially eliminate the need for introducing new taxes or relying heavily on borrowing.
“I keep saying that we don't need to introduce more taxes to collect more revenue. We have a number of taxes that we are not collecting enough,” he said.
Financial sustainability
Mr Ampem was speaking during a Sustainable Development Goals (SDGs) Financing for Development Dialogue organised by the United Nations Development Programme (UNDP) Ghana, in Accra on Tuesday, June 17.
The event was on the theme: “Advancing Ghana's Financial Sustainability with an Integrated National Financing Framework (INFF)”.
It was aimed at forging stronger collaborations, sharing expertise and collectively designing a strategic roadmap that would advance the country’s financial sustainability.
Meanwhile, the Deputy Finance Minister has stated that improved economic management has led to enhanced credit ratings, with Fitch upgrading the country’s rating.
He said sustaining such progress could lead to lower borrowing costs, enabling the country to access more competitive loan rates and get back on track towards economic development.
“Due to the proper management of our economy, we are receiving enhanced ratings from our credit agents.
Fitch has upgraded us, and if we are able to sustain this, our cost of borrowing is going to go down,” he said.
SDGs
Touching on the SDGs, Mr Ampem said the country required between $43 billion minimum and $70 billion maximum from now until 2030 to fully achieve the SDGs.
He said, according to the country’s INFF and Development Finance Assessment, that translated into an annual investment need of about $9 billion.
However, the country’s current financing could only meet half of the need, with an annual financing gap of about $4.5 billion to $5 billion.
He said the financing gap affected the country's ability to invest adequately in sectors that were foundational to inclusive and sustainable development.
Efforts
Mr Ampem said the Ministry of Finance would develop finance models, create enabling policies and ensure transparency on how funds were directed to priority sectors.
The deputy minister also said the establishment of Integrated Assembly Financing frameworks at the district level had resulted in revenue-related successes in five piloted assemblies.
“Together with our partners, we are also actively exploring the establishment of a Special Purpose Vehicle (SPV) to harness diaspora capital for SPV-aligned investments, particularly for critical sectors like MSMEs and infrastructure,” he said.
He explained that the proposed SPV would operate with high standards of governance and impact tracking, while offering risk mitigation tools to crowd in diaspora investors.
Renegotiate terms
The Resident Representative of UNDP Ghana, Niloy Banerjee, stressed the need for Africa to form a new narrative of addressing the massive leaks and huge tax avoidance in the country’s taxation framework.
“I don't need to tell you that Ghana is one of the world's leading producers of cocoa, yet Switzerland makes more from Ghanaian cocoa,” he said.
He called for investment in value addition and renegotiation in terms of trade in a tough manner.
He also pointed out that the country’s entire revenue structure was in Ghana cedis; however, its debt repayments were in US dollars.
“This is not an acceptable terms of exchange. We need to renegotiate our debt situation,” he said.
