84 percent of tax revenue in Ghana used in paying debt, Institute for Fiscal Studies director discloses

The Executive Director of the Institute for Fiscal Studies (IFS), Prof Newman Kwadwo Kusi has revealed that the quantum of tax revenue in Ghana is used in paying debt the country owes.

Finance Minister, Ken Ofori-Atta

According to him, 84 percent of the country’s tax revenue goes into repaying interest on the debt.

“This indicates that every GH¢1 tax collected, 0.84 pesewas goes into paying interest on the debt, thereby leaving virtually nothing in government’s coffers to take care of capital expenditure,” he said.

The Executive Director who spoke to journalists in Accra noted that the menace is as a result of the poor tax administration and a tax system that has failed to mobilise enough revenue for the economy, leaving the government with no choice than to borrow to finance the deficit.

“We have a very big problem with our tax system. And that is why even though we have GDP of over GH¢300bn, only 12.6 percent of that is collected as tax. So, your GDP can go up, but if your tax system is weak – you don’t have mechanisms for collecting the taxes – you will not get the revenue,” he said.

Adding that “Tax compliance is very weak in this country, and therefore we have a problem with our tax system and tax administration; we have to critically look at it. Otherwise, whenever we want to develop anything in this country we have to go and borrow money. That is why the country’s debt has increased from GH¢9.8billion in 2008 to GH¢205billion as we speak.”

Prof Kusi, hence, urged the government to take immediate steps to curb the menace.

“There is a need to deal with this issue. Dealing with the issue does not necessarily mean increasing the tax; we also have to improve tax compliance. The issue must be dealt with immediately,” he said.

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