Economist Dr. Priscilla Twumasi Baffour has cautioned the government against hastily removing taxes it promised to scrap, emphasizing that such a move could have dire consequences for national revenue and economic stability.
Dr. Baffour stated that while tax cuts might be politically attractive, the economic reality must take precedence to prevent further deterioration of Ghana’s fragile fiscal situation.
“It’s a difficult period, and I believe that there is nothing wrong if the government, I mean, the finance minister, comes out to say that we promised X, Y, and Z, but this is the reality—it is not possible.”
Dr. Priscilla Twumasi Baffour
The economist noted that the government still enjoys goodwill from Ghanaians. Therefore, instead of hastily scrapping multiple taxes, it should focus on what is economically feasible. She warned that failing to do so could push the economy further into instability, with disastrous consequences for businesses and individuals alike.
“The risk to businesses and Ghanaians as a whole is that if the trajectory that the economy is currently on switches and we enter into another phase of turbulence, it will be quite disastrous for everybody. It affects people in terms of standards of living. Fixed-income earners really struggle with high inflation and all that.”
Dr. Priscilla Twumasi Baffour
Political Cost
Dr. Baffour acknowledged that maintaining some of these taxes might come at a political cost. However, she stressed that ensuring economic stability should be the government’s top priority.
“Initially, it would mean some political cost, but I think that the government has a lot of room at the moment, and it should not be hasty in taking out all the taxes that it promised to remove if indeed it’s very difficult to make up for it.”
Dr. Priscilla Twumasi Baffour
Reflecting on past policies, Dr. Baffour pointed out that the motivation behind scrapping what were once termed “nuisance taxes” was to shift the economic focus from taxation to production. However, she noted that economic growth in Ghana takes time and cannot immediately offset the loss of tax revenue.
“The whole idea of, for example, taking out a lot of taxes, nuisance taxes as we heard some time ago, is the fact that you want to de-emphasize taxation and look at production. But the reality is that in our context, growth is quite difficult. It takes quite some time to be able to observe a given substantial level of growth.”
Dr. Priscilla Twumasi Baffour
Her comments come at a crucial time when the government is under pressure to fulfill campaign promises of tax relief while simultaneously working to stabilize an economy that has faced challenges including high debt, inflation, and revenue shortfalls.
Dr. Baffour’s warning serves as a reminder that while tax cuts may offer short-term relief to businesses and individuals, the long-term goal should be economic stability and sustainability. The government must, therefore, carefully assess the trade-offs before making any drastic decisions on tax policies.
Ensuring a balanced approach between tax relief and revenue generation will be essential to maintaining investor confidence and supporting national development efforts. Without adequate revenue streams, Ghana risks falling into deeper economic instability, which could negate any intended benefits of tax reductions.
While campaign promises are important, the reality of Ghana’s economy demands cautious and well-informed decision-making. The government must weigh the potential risks of revenue shortfalls against the benefits of tax relief to ensure a stable and prosperous economy for all Ghanaians.
READ ALSO: GEXIM Bank Explores Collaboration with Danish Embassy to Boost Ghana’s Export Sector
