Partner at Deloitte Ghana, has expressed the need for government to urgently find ways of diversifying its revenue sources in order to support the economy.
According to him, it is essential for government to do that in order to ensure the survival of the economy. He revealed that several factors have influenced the country’s current state and there is the need to address them holistically.
“So, our inability to diversify our revenue sources, not only with the current government but even for successive governments is one of the challenges we are facing today. If we don’t tackle that problem head-on, we are going to have issues…”
Yaw Lartey
Mr Lartey stated that one of government’s problems is its dependence on taxation. He explained that in the last two budgets that were presented, government was expecting to rake in about GHC100 billion, and GHC77 billion of that figure was supposed to come from taxes.
With this, he noted that the 77% of government’s tax was supposed to finance its total expenditure for the year.
“That was in my view, very high risk that we are taking because we have not diversified your revenue sources… What we haven’t dealt with, [when it comes to] the leadership of government is the factors that took us the IMF, and that has historically taken us to the IMF. First one is our low revenue base and lack of diversified source of revenue. So, our revenue base has been skewed towards taxation and I hear all the complaints by industries and associations.”
Yaw Lartey
Ghana’s public debt increases significantly
Furthermore, Mr Lartey highlighted that the second issue government is confronted with going into the mid-year budget presentation by the finance minister has been government’s public debt. On this issue, he revealed that government has increased the country’s public debt significantly in the last few years, mainly on account of factors, some of which are systemic.
“So, I will say for example, the exchange rate – as your local currency depreciated, your external debt increases. So, our external debt has increased by roughly GHC100 billion in the last two years because our local currency had depreciated, and you can see that that is reflected.”
Yaw Lartey
Meanwhile, Mr Lartey has indicated that there are some issues which are within the control of government and has compounded the distress on the economy. To this end, he stated that they stem from three area, one of which has to do with the energy sector and government’s debt to Independent Power Producers.
“… So, we had issues in the energy sector and we have to address that. The second has been our issue with the financial sector. So, we try to do the financial sector bailout and reforms, that also created another debt burden of about GHC25 billion… “
Yaw Lartey
Prior to this, the General Secretary of the Ghana Agricultural Workers Union (GAWU), Edward Kareweh, expressed the need for government to take a relook at its taxation policy. He revealed that certain policies introduced by government to supposedly increase revenue is doing the opposite. He indicated that some of these policies, which include introduction of taxes are crippling businesses and sectors of the economy.
Also, Mr Kareweh stated that when it comes to taxes, it is not just about how much government is going to tax a person that will necessarily translate into revenue, especially when the person or business does not have the capacity to contain that tax. With this, he expressed the need for government to review its economic policy as that will enable it realize that tax is “good to generate revenue, but tax should not be the first call to generate revenue”.
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