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Business News of Monday, 12 October 2020

Source: www.ghanaweb.com

Broaden tax base to close vast fiscal gap – World Bank urges Ghana, African countries

The World Bank has admonished Ghana and other African countries in the West African sub-region to implement innovative strategies aimed at broadening the tax net.

The move, when well implemented, will close the vast fiscal gap created by the coronavirus pandemic.

According to the October edition of its Africa Pulse report for 2020, the World Bank stated Ghana is among countries expected to witness an increase in its fiscal gap deficit projected to hit double digits by end of this year.

“Broadening the tax base can build up fiscal space by raising government revenues. The insertion of digital tools into public administration may help expand the set of taxpayers, reduce costs, and improve tax performance. Governments can better identify taxpayers by issuing digital IDs,” the report said.

It added; “They can also establish online platforms for e-filing and e-payments of taxes and import duties. Digital technologies help strengthen tax administration by lowering transaction costs and allowing innovation in tax policy. Digital tax administration may reduce tax evasion and fraud.

“Fiscal authorities need to spend their resources efficiently by cutting non-essential outlays and re-prioritising spending while maximising the impact of such expenditure on economic activity – thus creating fiscal space. Curbing unnecessary spending includes terminating ghost-workers and avoiding permanent increases in public salaries,” the report stated.

The World Bank further said, “Improving the performance of state-owned enterprises (SOEs) also involves cutting unnecessary costs in public expenditures. Amid widened deficits and high debt vulnerabilities, it is imperative for SOEs to use public resources efficiently. In this context, several actions can be undertaken to improve SOE performance.

“One, periodic reviews of SOEs to assess the amount and quality of the goods/services supplied; (2) provision of the right incentives to boost managers’ performance and the capacity of government agencies to improve SOE oversight; and (3) a level playing field for SOEs and private firms to foster greater productivity and avoid protectionism (that is, by limiting special treatment for SOEs),” it added.

The coronavirus pandemic and its associated impact has resulted in revenue losses and increased expenditure with Ghana’s public debt figure pegged at more than GH¢263 billon, representing 68.3 percent of Gross Domestic Product (GDP) with the external debt forming the largest part at 35.8 percent of GDP.

According to the Ghana Revenue Authority, revenue mobilisation in the first-half of the 2020 fell short of its target by 26 percent.

This resulted mainly from shortfalls in oil revenue, Customs receipts and non-oil Non-Tax revenues.

Additionally, Total Revenue and Grants for the period amounted to GH¢22 billion, compared with a planned target of GH¢29.7 billion.