The Value Added Tax (VAT), among other government revenue sources, is not operating properly, according to Information Minister Kojo Oppong Nkrumah.
He stated that in order to rely less on funding and to lower the debt load, this is a scenario that needs to be addressed.
The Ofoase Ayirebi politician said on July 6 at the 3businesscolloquium hosted by Media General that “A number of our revenue handles in this country are not operating adequately. Take VAT. Data on VAT compliance have decreased. Those in charge of fiscal policy will tell you that occasionally raising the rate is necessary to make up for poor performance.
“I agree that you have to ensure that the rates are down, like we always say, broaden the base. But we have to come to a certain point where we push more to get those VAT numbers where they ought to be, so that we can get funding for the Ghana we want.
“Take property rates. If you were to send the piece of paper round this auditorium to ask everybody how much property rate did you pay in the year 2020, we may be amazed at the data we are getting.
“These are the realities, in all humility, that we have to confront to move tax to GDP rate from this 12 per cent to about 25 per cent, so that you rely less on financing and reduce your debt burden but that will deal with only one side of the challenge.”
According to Dr. John Asafu-Adjaye, a Senior Fellow at the Africa Centre for Economic Transformation (ACET), investor confidence in Ghana’s economy decreased as a result of the country’s downgrading by global credit rating agencies; therefore, approaching the International Monetary Fund (IMF) to restore that confidence makes sense.
Given the recent economic issues, according to Dr. Asafu-Adjaye, he was not surprised by the government’s choice to approach the IMF.
“Personally, I wasn’t surprised because given the sovereign rating downgrade, that Ghana suffered, Ghana is not able to to go into the capital market , investors confidence had gone down, capital flight. So I thought that going to the IMF makes sense in terms of restoring investor confidence,” he said
The IMF staff team is in Ghana to start preliminary conversations with the Ghanaian authorities about a potential IMF-supported program. Carlo Sdralevich, the mission chief for Ghana, is leading the delegation.
In response to a request from the Ghanaian government, Mr. Sdralevich stated in a statement that “an IMF staff team will in the coming days begin discussions on a potential program to support Ghana’s domestic economic policy. Given that in-depth conversations have not yet occurred, we are still in the early stages of the process.
“The IMF stands ready to assist Ghana to restore macroeconomic stability, safeguard debt sustainability, and promote inclusive and sustainable growth, and address the impact of the war in Ukraine and the lingering pandemic.”
“We are looking forward to our engagement with the authorities in Accra,” the Fund said.