Economist, Dr Theo Acheampong, has expressed the need for government to restructure some of its tax handles.
According to him, the collection of taxes in the country is currently a “chicken and eggs” situation.
He revealed that government has to raise the tax base if it is collecting 13% to 14% of GDP in terms of taxes, whereas other peers are doing 18% to 20% in Africa and the subregion, which is a problem.
“So, the issue then is what are the tax handles that traditionally, we have been collecting these taxes from? If you actually breakdown a little bit, you’ll see that for a major chunk, we’re doing all these indirect taxes…. The fundamental point is that there are some tax handles that we need to restructure including things like property taxes… Yes, we need to reform some of the tax handles.”
Dr Theo Acheampong
Furthermore, Dr Acheampong expressed his support for the betting tax instituted by government. He explained that if not for anything at all, it will help in trying to shift certain consumption patterns or change certain behavioral patterns.
That notwithstanding, he indicated that government must be much more “open and honest” about its spending and also efficiency in such spending.
“We’ve done quite a lot of work over the years and if you look at many sectors of the economy, there’s a lot of waste in the system and you can quantify the extent and amount of this waste. If you are able to block some of them – the procurement related issues, non-implementation of GIIF, things to do with incurring expenditure overruns, then there may not even be a need to introduce these new tax handles. So, we need to do both, it’s not like a binary choice.”
Dr Theo Acheampong
Commenting on the state of Ghana’s economy, Dr Acheampong stated that it’s been a tough and difficult one, although government has made some progress on the debt restructuring. Nonetheless, he noted that the restructuring still hasn’t materialized yet in terms of improving the fiscal balances of the country.
“So, when you look at the number of the core economic indicators and you translate it also at the micro level on how it affects livelihoods, it’s not a good story… The point is yes, we’ve had a global inflationary environment for the last one and half year since Russia invaded Ukraine, but different countries have felt it differently. So, even when people make the argument that inflation is being felt in the UK, US and all these advanced economies, you’re still talking in relative terms about 7.5% to maybe about 10% inflation in these jurisdictions.”
Dr Theo Acheampong
Inflation, second round of DDEP by government
Furthermore, Dr Acheampong highlighted that government has no justification for the inflation rate of the country. He stated that for most countries government tends to compare itself to such as the US and UK, they have witnessed a “major correction now where inflation is starting to come down as a result of the hikes in policy rates by the US, Feds” and others.
“But when you look at Ghana and look at Africa, there are 54 countries, but the fundamental question is why is it that Ghana alone, you’re talking in excess of 40%… So, it tells you that fundamentally, there’s something wrong and amiss in the case of Ghana.”
Dr Theo Acheampong
Touching on the second round of the Domestic Debt Exchange Programme by government, which is set to include ESLA, Daakye bonds, and possibly treasury bills, Dr Acheampong insisted that any attempts to restructure T-bills is going to “spell disaster” because the government had to “borrow at the short end of the market”.
He explained that with the current state of the financial sector and all the issues therein, if government tries to push to restructure treasury bills the way they’ve done with the other bonds and other instruments, it will cause a lot of “fear, panic and the very liquidity” government is looking for may actually end up drying up.
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