Ken Ofori-Atta, the Finance Minister of Ghana, has disclosed in address to Parliament that government’s total indebtedness to pension schemes as at end May 2023 stands at GH¢2.63 billion.
Breaking down the debts owed the scheme, the Minister noted that the debt comprises Tier 1, Controller and Accountant Generals Department Mechanise payroll (Ghc1.62bn), Tier 1 subvented institutions (Ghc188m), Tier 2 mechanised payroll GHc8.08m and Tier 2 subvented institutions (Ghc6.1m).
However, he noted that the government paid 2.672bn to various pension schemes in 2022, between January and early May 2023, government had also paid 2.26bn.
Ken Ofori-Atta explained that the amount comprised of Tier 1 of the Controller and Accountant General’s Department mechanised payroll GH¢1.62 billion, Tier 1 of subverted institutions GH¢188.59 million, Tier 2 of mechanised payroll GH¢808.21 million and Tier 2 of subverted institutions GH¢6.84 million.
“Mr Speaker, the government paid GH¢2.67 billion to various pension schemes in 2022. Between January and the end of May, 2023, the government had also paid GH¢2.26 billion.”
Ken Ofori-Atta
The finance minister revealed in statement read on his behalf by the Minister of State at the Ministry of Finance, Dr Amin Adams. He was responding to an urgent question by the former Minority Leader, Haruna Iddrisu, who sought to know how much was owed the various pension schemes, including the Social Security and National Insurance Trust (SSNIT) by the government of Ghana.
The new National Pension Scheme was instituted by the National Pensions Act, Act 766 which ensures that every Ghanaian worker receives retirement benefits as and when due. The New Pension Scheme was launched on 16th September, 2009 and its implementation started in January 2010.
The minister also took a question from the National Democratic Congress (NDC) Member of Parliament (MP) for Tamale North, Suhuyini Alhassan Sayibu, who asked whether the Ghana Revenue Authority’s 24-month contract for an amount of about $18.24 million between McKinsey & Company Inc. Ghana, achieved the overarching aim of increasing tax revenue substantially over and above the baseline of 17 per cent year on year growth.
Revenue Mobilisation Remains a Challenge for the Government
Responding, Mr Ofori Atta said revenue mobilisation remains a challenge for the government. He noted that tax-to gross domestic product ratio averaged 13 per cent, which was lower than the average 18 per cent for the sub-region. “Therefore, unlocking the full potential of our domestic revenue mobilisation is one that is at the core of the President’s vision of a Ghana Beyond Aid,” he said.
Ofori-Atta told the House that McKinsey was engaged to support the government’s efforts to increase tax revenues over the baseline of 17 per cent year-on-year growth and other interventions to increase efficiency and effective work culture. He said the overarching target of 17 per cent year-on-year growth was exceeded and the total revenue growth recorded was 28 per cent year-on-year. “Mr Speaker, GRA’s total payment to McKinsey over the contract period of 2018-2022 was $12.2million.
“In terms of performance, the collaboration between GRA and McKinsey resulted in an increase in revenue from GH¢38 billion in 2018 to GH¢75.5 billion in 2022, a cumulative average of about 19 per cent over the period.”
Ofori-Atta
The finance minister indicated that not only did McKinsey help the government increase its revenue, but it helped lead a cultural shift and professionalism, including the use of enhanced performance appraisal and analytical tools, which would anchor significant improvement in revenue mobilization.
“Mr Speaker, despite these very good results, and Ghana’s current tax-to-GDP ratio rising from 12.1 per cent in 2016 to 13.8 per cent as at end 2022, our revenue performance is still one of the lowest in the sub-region.
“For context, our peer countries are collecting an average of 18 per cent while Organisation for Economic Co-operation and Development countries are achieving about 34 per cent.”
Ofori-Atta
The minister Indicated that there is evidence that Ghana has enormous capacity to double its tax revenue, and at the very minimum, be at par with its peers without introducing new taxes.
In line with such ambition, Ofori-Atta said the government is leveraging digitalisation, including initiatives such as the E-invoicing, E-VAT, E-Levy, Ghana.gov among others to expand the tax net, eliminate leakages and close the tax gap.
“Results from the pilot phase of the E-VAT and E-invoicing, supplemented by physical monitoring by staff of GRA are truly revealing. The initial results have emboldened us to expand the coverage to other targeted entities.”
Ofori-Atta
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