Dr. Kwadwo Opoku, a Research Fellow at the Centre for Social Policy Studies (CSPS) at the University of Ghana, has urged the government to allocate some funds in the 2022 budget to undertake research on how to improve revenue mobilization in the country.

According to him, one of the major problems facing Ghana, which successive governments have not found an antidote to, is low revenue mobilization. This, he said, puts pressure on the government to continue to borrow to finance its increasing expenditures.

“I think our main problem is taxation. I’m hoping that the finance minister, when he reads the budget, he will provide the best way to increase tax revenues. There is the need for a peculiar tax design.

“It’s better for government to push some resources into doing research and bringing the best way to tax Ghanaians. Because the tax to GDP ratio is about 12 to 13% or so, that is below even the Sub-Saharan African average, which is not good at all. So, if government recognizes this, we need design of our taxes based on home-made research”.
Dr. Kwadwo Opoku

Government’s Revenue mobilization efforts

Dr. Opoku lauded the current government for its commitments towards improving revenue mobilization through digitization. But indicated that there is the need to embed this digitization in the tax policy design because “digitization alone will not be able to generate the revenues”.

Still stressing the need for home-made research to improve revenues, Dr. Opoku told the Vaultz News that even though the government does some consultations with experts prior to reading the budget, that may not be enough to address the peculiar challenges facing the country in terms of revenue mobilization.

The Economist elucidated that these experts may bring suggestions based on some research findings by citing data from other countries, “but can they fix our domestic problems?”, he quizzed. He stated that most of the research done in academia are sponsored by international donors and are made to suit the interest of these financiers.

“So, if the international people that fund a lot of research are not interested in this area, there wouldn’t be any funding for it”.
Dr. Kwadwo Opoku

Fiscal consolidation efforts

The Economist believes the government will continue its fiscal consolidation efforts in 2022 to limit borrowing and reduce the growth of the country’s debt stock.

“I believe they are going to try to limit the borrowing. Meanwhile, I don’t think that’s the best policy option for us, given the situation that we find ourselves. But, it looks like the public is growing so much detest for a high fiscal deficit and borrowing. So the managers of the economy are also getting that. So, I think although we cannot avoid fiscal deficit and borrowing, they will kind of try to consolidate”.
Dr. Kwadwo Opoku

The Economist therefore, urged the government to replace inefficient taxes with more efficient ones that will capture a large proportion of tax payers instead of focusing on taxes that only a few Ghanaians will be paying.

“Basically, there is no room; the fiscal space available to government to operate its expenditure is not available. When it comes to taxation also, Ghanaians are growing averse to taxation. Looking at how things are going, especially fuel prices and people agitating for a reduction or taking away some of the fuel taxes, it’s going to very difficult for the government to introduce new taxes.

“So, the best option for the government is going to be to substitute inefficient taxes; taxes that are basically not able to generate enough resources. So, a smart way is to take them away and introduce new ones”.
Dr. Kwadwo Opoku

Key Sectors

Touching on the key sectors the government should focus its spending on next year, Dr. Opoku said “of course we know that given our low level of unemployment, the most important sectors are now agric and industry”.

However, he indicated that it doesn’t mean that the government should ignore the services sector since we “cannot do away with the services because it’s very important especially given this era of automation and the digitization of a lot of things in the services sector”.

According to Dr. Opoku, within the industry, the government should focus more on the construction sub-sector because it’s very important for growth.