Terkper calls for concentration on 4 major revenue streams
Former Finance Minister, Seth Terkper, has advised the government to focus on making the country’s four major revenue streams effective to produce the needed revenue for economic development and sustainability.
The revenue handles are income tax [personal and corporate], Value Added Tax (VAT), petroleum tax, and import duty.
“As a developing/lower middle-income country, these are the four core taxes, which are the pillars of our revenue regime, and making them work would be to our gain, and help us avoid going back for external support periodically” he said.
“If you take the whole of the about 15 levies we have, they’re not contributing more than six per cent to Gross Domestic Product (GDP), and are distorting the primary, which hurts businesses, even the more,” he said.
He made these remarks during a media dialogue on Ghana’s International Monetary Fund programme.
The dialogue was on Ghana’s ongoing $3 billion loan-support programme with the International Monetary Fund (IMF).
He urged the government to scrap of the Electronic Transactions Levy (E-levy), and not introduce the 15 per cent VAT on electricity and emission tax, expressing confidence that doing so would engender compliance in existing tax handles.
“The levies are distortive, and encouraging evasion and avoidance, so let’s clear them and focus on the country’s pillar tax regimes,” the former Finance Minister said.
He expressed concern, saying: “For example, Integrated Tax Administration System (ITAS) – a digitisation measure that can help us expand the tax base has been there for more than seven years, and we’ve not been able to introduce a domestic IT system for the Ghana Revenue Authority when the plan and World Bank funding was there.”
He also called for pragmatic efforts in having a debt management policy that would discourage the government from borrowing beyond certain threshold and ensure timely repayment.
He proposed exploring alternative funding sources beyond short-term treasury bills.
According to him, the country stands in danger by relying largely on T-bills for financing.
“We cannot sustain the economy on treasury bills because treasury bills are for three months. So, at the end of the three months, we must pay,” he explained.
“Inadvertently, we are increasing the public debt because we do not have a payment mechanism since the sinking fund is no more,” he said.
He further cautioned the government on the ramifications of not including the nation’s arrears as part of the total debt stock.
“The fact that we are doing well may not mean if our primary balance were good at indicating that we were doing well. I can assure you that we would have settled our domestic debt and would have started issuing three-year bonds.”
He added, “the tendency to leave out arrears has hurt us before, and we should be very mindful it doesn’t hurt us again.”
E-Levy
He urged the government to scrap the Electronic Transactions Levy (E-levy), citing its failure to achieve its intended goals
He expressed confidence that scrapping E-levy would engender compliance in existing tax handles.
He expressed greater support for the implementation of a digitalized tax system by the Ghana Revenue Authority, believing it would improve efficiency and boost domestic revenue collection.
He reiterated warnings against the use and reliance on the primary balance as a fiscal anchor by the government, particularly under the IMF programme.
He argued that the Government cannot continuously use the primary balance as the basis or benchmark for its “good performance” under the IMF programme as the primary balance does not fully reflect the country’s actual deficit.
On the way forward in the implementation of the $3 billion loan-support programme with the International Monetary Fund (IMF), he said Ghana must be steadfast in policy and reform implementation.
This should include measures that would shore up revenue and reduce expenditure to ensure durable restoration of macroeconomic stability and debt sustainability.
