Former Minister of Finance, Seth Terkper has said the consistent inability of the current government to effectively audit tax exemptions is worsening the country’s debt portfolio.
Mr Terkper argued that Ghana continues to lose huge revenues to tax incentives which in most circumstances are not well managed.
He explained that while tax exemptions are good and continue to be of help to some sectors of the economy, the abuse of the current incentive regime under this government is taking a toll on the economy.
A recent report by ActionAid reveals US$901.1 million has been lost in tax incentives through parliamentary tax waivers alone to corporations between 2018 and 2020 and about US$657million through the Ghana Investment Promotion Centre in 2018.
Ghana’s public debt stock currently stands at GHc273.8 billion, according to the November 2020 Summary of Financial and Economic Data by the Bank of Ghana. This amount is equivalent to US$48 billion. Indeed, the country added GHc10.7 billion to its public debt stock between July and September 2020.
The rising debt according to the BoG has been precipitated by the impact of COVID-19 whereby the nation had to borrow extra to finance the budget and also support Micro, Small and Medium Scale Enterprises who were heavily impacted by COVID-19.
However, Mr Terkper, addressing a team of business journalists during a round table discussion in Accra, last Friday, said government’s inability to minimise non-essential exemptions and lack of serious audits cannot be blamed on COVID-19.
“Strengthen GRA to check abuse of taxes. That is their job. We also need to limit the level of tax incentives,” he said.
Other challenges he argued include, high compensation and interest payments on loans, as more than 100 percent of tax revenue is used for compensation.
“Government can argue that it has non-tax revenue and others but remember, tax revenue includes the earmarked funds. The unlikely payment of Independent Power Producers (IPPs) considering the fact that ESLA is already encumbered,” he stressed.