Strict tax compliance will boost govt’s revenue — Prof. Bokpin

In the wake of aggressive actions by the government to raise more domestic revenue to shore up its finances, an economist wants greater compliance in the collection of Value Added Tax (VAT).

According to him, what the country needed at this time was to ensure that all businesses and individuals mandated by law to charge VAT did so without cutting corners and not necessarily an increase in the VAT rates. 

For instance, Professor Godfred Bokpin, who is also a professor of finance and Senior Lecturer at the University of Ghana, described the 45 per cent rate of VAT collection was woefully inadequate.

“We can shore it up by ensuring full compliance by eligible institutions mandated to charge VAT,” he suggested.

Professor Bokpin also noted that; “We can, with increased efficiency through automation and a reduction in human interface, raise more revenue from VAT collections”, he said while contributing to a radio discussion on the new tax bills proposed by the government in its quest to meet part of the conditionalities by the International Monetary Fund (IMF) to access a $3 billion bailout.

Tax bills

The call for an increased VAT compliance comes at a time when, the government is racing against time as it urgently seeks the full support of Parliament to pass three crucial tax bills.

They are the Income Tax (Amendment) Bill, Excise Duty and Excise Tax Stamp (Amendment) Bills as well as the Growth and Sustainability Levy Bill.

The passage of these outstanding revenue mobilisation bills are expected to facilitate approval by the IMF Board to release the $3 billion bailout funds.

It is anticipated that should these outstanding revenue bills, which are necessary for effective budget implementation sail through, it will enable the country to push its Tax-to-GDP from less than 13 per cent to the sub-Saharan average of 18 per cent.

The government expects the recent move to complete four out of five agreed prior actions in the Staff Level Agreement.

Agitations

Meanwhile, ahead of the passage of the bills, various trade associations including the Ghana National Chamber of Commerce and Industry (GNCCI), Association of Ghana Industries and Ghana Union of Traders Association (GUTA) have opposed new laws and call on the government to reconsider the new tax bills because of its impact on business.

To them, these addtional tax liabilities would affect their businesses and their competitiveness, particularly at a time when the implementation of the Africa Continental Free Trade Agreement (AfCFTA) had kicked in with other countries leveraging on the opportunities the policy presented to penetrate through the Ghana market.

According to Professor Bokpin, over the years, the failure of the revenue collection agency, the Ghana Revenue Authority (GRA) to ensure the effective and efficient collection of taxes was not the best and urged greater action in that respect.

Generally, with regards to the country’s tax regime, Professor Bokpin said, the government policy to raise revenue was always to resort to increasse in the percatage of the tax threshold instead of ensuring that eligible persons and businesses honoured their tax obligations.

He maintained that governments over the years had failed to widen the tax net and that he said, constituted a major reason why the country was not able to bring its tax collection rate at par with the sub-regional average of at least 18 per cent.

IMF bailout

Government is seeking a US$3 billion balance of payment support from the Breton Wood institution.

This is because in the last couple of years, the doors to the international capital markets have been shut to Ghana as a result of its huge debts which currently stands at over 100 per cent.

To bring the debts to sustainable levels, the government is embarking on a number of measures which includs the recent Domestic Debt Exchange Programme (DDEP) in which approximately 85 per cent of bondholders participated. 

Government managed to rake in ¢82.99 billion, describing the result as a significant achievement for the government to implement fully, the economic strategies in the post-COVID-19 Programme for Economic Growth during the current economic crisis.

It is also expected that the proposed new tax measures will help to close the revenue gap.