Ghana servicing interest on debt with its internal revenue
Of every Cedi government collects as tax, GH¢41 pesewas is used to service interest debt, Professor Newman Kwadwo Kusi, Executive Director, Institute for Fiscal Studies said on Monday.
“Ghana spends over 41 percent of tax revenue to service interest rate on debt. From last year up to July this year chunk of our revenue goes into debt payment,” he said.
“The public debt stock which stood at GH¢C142.3 billion in December 2017 (excluding the GH¢4.7 billion ESLA Plc. bond issued in October 2017) had by July 2018 risen to GH¢159.4 billion.
“This indicates that the country’s debt stock increased by GH¢17.1 billion during the first seven months of this year, and by GH¢36.8 billion in the less than two years of the New Patriotic Party administration. As a percentage of the old GDP, the debt stock dropped from 69.1 percent in 2017and to 65.9 percent in July 2018”.
Speaking at the Annual Economic Review Forum organized by the Business Council for Africa in Accra on Monday, Prof Kusi said the interest payment and statutory obligations payment continued to place a considerable strain on stress on government limiting the space for critical development and social expenditure.
It was on the theme: “Deepening Government’s Collaboration with the Private Sector: The Role of Policy”.
Prof Kusi called for the need to significantly increase domestic revenue to help to loosen the rigidity of the budget and create space for policy maneuver.
“Roping in most of the informal sector into the tax net is key to increasing the overall intake. Recent efforts to digitize various areas of economic activity, including the issue of tax identification numbers, promises to increase tax revenue from the informal sector,” he said.
Prof Kusi suggested to the government to completely overhaul the tax-exemptions regime, plug all loopholes, deal with vested interests, check abuse and reduce exemptions to the minimum.
Tax rebates granted to the mining sector and free zones, he stated should be reviewed to maximize revenue and also bring them in line with modern trends and standards. Some of these tax rebates were granted decades ago and had become obsolete and are inimical to the country’s interest.
“There is also the need to undertake a periodic re-valuation of property to ensure that the assessed taxes commensurate with the commercial values of the property. District Assemblies who are responsible for collecting property taxes seem to lack the capacity and resources to undertake property revaluations and collect the due taxes,” he said.
Prof Kusi said government needed to take primitive steps to stop the illicit financial flows through trade mis-invoicing and other malpractices estimated to have cost Ghana billions of dollars in revenue losses and urged the state to rigorously pursue the Cargo Tracking Note (CTN) to check trade mis-invoicing.
On government expenditure, he stated that government should reduce and rationalize expenditure in the area travel, entertainment, subsidies, free allowances.
To improve compliance, he suggested to the Ghana Revenue Authority (GRA) to take steps by advance action on the use of taxpayer information through integration of data and analytical reporting to enable tax officials to identify taxpayers especially in the informal sector not yet captured, and obtain accurate information on the existing ones.
Mr Kwadwo Ohemeng Asumaning, Chairman of the Business Council for Africa, called on the government to take advantage of technology advancement to gather data to be able to mobilize revenue to develop the country.
“Countries including- South Africa have digitized their system so taxes are paid at the right time and the system is able to track activities of the business in both the formal and the informal sector. This is helping them in revenue mobilization”, he said.