Editorial: Apply ‘sin tax’ appropriately to boost domestic revenue


Domestic revenue mobilization has not met expectations or revenue targets that is why the International Monetary Fund (IMF) is urging government to leverage underutilised tax handles such as alcohol, tobacco, and property taxes to boost domestic revenue mobilization efforts.

According to the Fund’s Article IV report, non-fuel excises make up a very small fraction of Ghana’s tax base, contributing only 0.1 percent of GDP in 2018 and 2019. By comparison, Uganda and Kenya raise over 2 percent of GDP in excise taxes.

Ghana’s tobacco excises amount to just 16 percent of the retail price, well below the average tax burden of middle-income countries and the WHO’s recommendation of 70 percent of the retail price. Hence, introducing reforms in the sin taxes – alcohol and tobacco, the IMF says, could generate as much as 0.45 percent of GDP and encourage healthier behavior.

Another area of taxation the IMF strongly feels is underutilised, is property rates which, currently, raises revenue equal to a meagre 0.01 percent of GDP each year. The Fund is therefore urging government to leverage on its digitisation agenda to boost revenue in this area, as this can increase the performance to 0.4 percent.

Currently, the country’s tax to GDP has averaged 12 percent in the past five years, making it lower than the 25 percent for middle-income countries, and far below the 20 percent minimum target for ECOWAS countries under the Eco currency system, to which Ghana is a signatory.

The ratio further compares unfavorably to peer countries such as South Africa and Kenya with 5-year tax-to-GDP ratio averages of 26 percent and 16 percent respectively.

To further improve the situation, the IMF has advised government to introduce simple structures and payment channels to encourage tax compliance and make it easy for people to pay their taxes with ease.

Those who work in the informal sector should be provided with simplified payment platforms to register and pay their income tax without going through laborious documentation and processes, the Bretton Woods institution has advised.

Plans to digitalize all payments to government (including payments to GRA) will also be a critical step in reducing revenue leakage.

Indeed, meeting domestic revenue targets has eluded the economy for far too long, and the IMF is pointing out areas that can be tapped into to boost domestic revenue mobilization. We need to incorporate some of the suggestions to boost domestic revenue.

MDAs’ decline in financial infractions encouraging…

Director General of the Internal Audit Agency, Dr. Eric Oduro Osae has revealed that financial infractions by Ministries, Departments and Agencies (MDAs) declined by 32 percent in 2020, compared to the previous year.

He further added that the Internal Audit Agency, working through internal auditors and audit committees across the country, saved the nation GH¢235,229,749.08 in the 2020 fiscal year.

He attributed the good work to internal auditors and the various audit committees.

Currently, the agency has commenced a process of naming and shaming institutions and support prosecution of persons found to have stolen monies or engaged in financial irregularities under the PFM Act and Criminal offence Act,1 960 (Act 29) which we fully endorse to protect the public purse.

Dr. Oduro Osae stated that sustaining internal controls through checks and balances is key to preventing misuse of public funds and corrupt practices before they occur.

He observed that the practice of citing people for infractions and making recommendations on such persons and institutions involved in infractions in the Auditor-general’s report, without taking action to prosecute them, would no longer be countenanced which again is refreshing to hear.

He added that henceforth, the IAA was repositioning itself to effectively play the preventive role in the fight against corruption.

For his part, IAA board chair, Joseph Winful stated that as part of the restructuring process, the IAA has put forward a draft bill to review the IAA Act, 2003 (Act 658) to make the agency truly independent Internal Audit service.

Adopting the preventive role is a commendable gesture by the IAA since internal auditors have the ability to stop the rot before the rot becomes putrid and bleeds the economy as has been happening in the past.

We believe this new position will see a marked reduction in financial irregularities, particularly in MDAs and MMDAs.  Once the culprits know they will be exposed and face the rigours of the law, perhaps there would be a behavioural change for the better and financial infractions will reduce, if not, eliminated altogether.






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