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Opinions of Wednesday, 24 July 2013

Columnist: Arhin, Albert A.

A broke Ghana?

Taxes, Better Ghana ‘chop-chop’ and Ghana’s leaking purse

Do you know that nearly GH¢119. 4m (1.194 trillion old cedis) of Ghana’s 2011 revenues could not be located in the books of Ministries, Departments and Agencies (MDAs) at the end of that year? Well, that is according to the 2011 Auditor-General (A-G) Report.

The recent weeks have seen a polarised debate on the state of Ghana’s economy. On one hand, the main opposition party and its allies suggest that the country is broke and in tatters. On the other hand, the ruling government—and its apologists contend that the country is only facing fiscal challenges. Whatever these semantic mean, there is a near consensus that all is not too well with the country’s finance at present.

Part of government’s effort to raise more revenues for socio-economic development have resulted in increased taxes on almost every facet of the economy in the last few weeks—condoms, agricultural inputs, communication etc. Ordinarily, tax reforms and hikes are essential for socio-economic development—an argument articulated by government to justify the recent tax increases. Which citizen in Ghana would not want to see this country developed? I doubt whether there is any! Every citizen equally acknowledges that taxes, loans and other sources of income are essential if this normative goal—of seeing the country developed—is to be achieved. But the tax increment arguments often become flawed when the money ends up in the pockets of individuals rather than the purse of the state.

Each month, about 25% of my Gross Pay is deducted as taxes (and SSNIT) at source. Seeing this on my payroll used to be a delight because I know I am contributing in small way towards the development of Ghana. But it becomes more frustrating—and even annoying—to find out that Ghana’s purse is leaking with many of the revenues earned by the state ending up in the pockets of very few in the society.

Now, as a way of showing how Ghana’s purse is leaking, here are few extracts from the 2011 Auditor-General’s Report. Mind you, this report is not for 2012—the election year where Government had to do ‘certain things politically so as to stay in power’, as Fiifi Kwetey, the then Deputy Minister of Finance puts it. According to the said report (page 4), the financial impact of irregularities identified in the books amounted to GH¢119. 4m (1.194 trillion old cedis).

The report identified Cash irregularities of GH¢33.9m. These were due largely to misappropriation of revenue/other receipts; imprests not accounted for and unauthorised expenditure. As high as GH¢52.8m were noted as tax irregularities resulting from uncollected taxes and other abuses. Additionally, payroll irregularities involving mostly unearned salaries paid to separated staff amounted to GH¢1.021m.

Irregularities in contract administration particularly at the Ministries of Health, Defence, Roads and Transport, Education and Employment and Social Welfare amounted to GH¢24.9m. Even vehicle insurance were paid by some ministries for its staff (not for the organisation) as the Ministry of Health alone made a wrongful payment of vehicle insurance premium to the tune of GH¢3. 4m. There were further irregularities relating to Stores and procurement, amounting to about GH¢0.780m. These are only few of the ‘chop-chop’ contained in the 508-paged document (which is freely available for download on the internet). The A-G has already made it clear (in the report) that copies/versions of the report were made available to heads of institutions before being finalised and made public so no institution should attempt coming on air to deny these findings—they will be of no effect.

There appears to be too many holes in the purse of Ghana. It is not the increment of the tax which is necessarily the problem for Ghanaians. It is the broad day light looting and misappropriation of these financial resources which induce opposition and unwillingness to pay for the taxes. While the Government and its representatives are moving from country to country and institutions to institutions chasing loans, here we are squandering the little resources we have. It is like we are fetching water with a basket. We need to plug and seal these holes alongside the quest for more resources!

Plugging the holes in the purse: What do we need to do? The issues contained in the A-G report are not new. The underlying reasons, causes and motivating factors of the rot are well articulated in the previous reports—and recommendations made accordingly. Yet, they hardly get implemented. The announcement by President asking the Attorney-General/Chief Justice to study the report and take actions on culprits is a good step but it is not sufficient. Ghana has beautiful laws such as the Financial Administration Act, the Financial Administration Regulations, the Public Procurement Act as well as the Audit Service Act which all individuals, Ministries, Departments and Agencies have to comply with. We need to enforce these laws. Some of the other technical ways of plugging the holes in the purse include asking the various culprits to repay the money to the Government with more than 50% interests; severely punishing offenders to serve as deterrents; strengthening and recognition of Internal Audit Units established within the MDAs and the facilitation of their role which can help to reduce the incidence of irregularities that are reported annually by the Auditor-General.

Even more importantly, it takes decisive leadership and committed service to withstand the so-called temptation to manipulate the financial systems in place in the public sector. Officials need to be truthful and honest and place the interests of the country above personal and political interests. We also need to change our attitudes towards the businesses of government and eschew corrupt practices. While we seek for more financial resources through taxes, loans, bonds etc, we should also invest energy and attention into plugging the holes of the country’s purse—else we do a ‘cos 90’ job. It is of my belief that the recommendations contained in the 2011 A-G report will be executed to seal the leaking purse of Ghana.

Albert A Arhin Department of Geography University of Cambridge E: rainfallaaa@yahoo.com