The Institute of Economic, Statistical and Social Research (ISSER) at the University of Ghana is calling on government to turn its attention to efficiency in collection of taxes as a means of improving the revenue situation, rather than introducing new ones or increasing those existing.
As of the second quarter of the year, data from the Bank of Ghana indicated that tax revenue hit GH¢12.8billion against a target of GH¢55.8billion for the year. However, tax revenue has consistently missed its target even in periods when government has introduced new ones or increased those existing.
But given its contribution to revenue, as it makes up about 80 percent to total revenue, Director of ISSER, Professor Peter Quartey, is calling on government to put in systems that will improve tax administration in the 2022 budget rather than to think of increasing or introducing new ones.
“If you overtax the same people over and over again, they might either avoid or evade tax. We should ensure that we continue using the existing tax structures we have and make them more efficient to collect more, rather than introducing new taxes which might not even yield the needed returns.
“Sometimes, the cost of collecting those taxes might far outweigh the yield. So, we have to constantly be reviewing our tax system and expand the base through digitisation and other means,” he said during the State of the Ghanaian Economy Report launch at the University of Ghana.
He further stated that it will be necessary for government to review the new taxes introduced in the 2021 budget to ascertain which ones are to be retained or scrapped, as some of them are not making any significant contribution to domestic revenue; hence becoming a nuisance to tax payers.
“I think we should review them [the taxes introduced in 2021] because we realise from the second quarter data that the COVID-19 levy as well as the financial sector levy are yielding positive outcomes, whereas others like the sanitation levy are not bringing in enough.
“Maybe in the third quarter we might see some changes; otherwise, a review will be useful. For instance, if the sanitation levy is not bringing in more revenue and we are still spending money to collect those taxes, then we’d better scrap it and find other means of raking in more revenue,” he said.
Also commenting on the tax situation in an interaction with the media at the event, Chief Executive of Stanbic Bank, Kwamina Asomaning, added his voice to the many calling on government to review tax exemptions, as the ISSER report reveals import exemptions from international trade increased from 33.6 percent in 2018 to 45.7 percent in 2019, and further to 46.9 percent in 2020.
“I am particularly disappointed with the extent of tax exemptions. What is the point of increasing taxes on other parts of the economy only to turn round and give exemptions? So, those are some of the tough decisions we need to take. If we give exemptions and the growth isn’t coming through, then we might as well take away the exemptions. So, those are some of the tough decisions that government has to take.
“There is also an issue around reduction of spending; government spending is high. The three levers that government has are increasing revenue, reduction of spending, and stimulating growth. So by putting in place measures that improve their execution across those three levers, the odds of us coming out of the economic doldrums are much higher,” he said.
Overall, government’s total revenue and grants for 2021 are projected to rise to GH¢72.4billion, equivalent to 16.7 percent of GDP and up from an outturn of GH¢55.1billion GDP recorded in 2020. Of this, domestic Revenue is estimated at GH¢70.9billion.
Of the total domestic revenue, non-oil tax revenue will constitute about 74 percent and amount to GH¢53.6billion – equivalent to 12.4 percent of GDP.