A tax Partner of accounting and auditing firm, PwC, Mr Abeku Gyan Quansah has described the rising interest payments as a worrying trend which needs to be reversed as soon as possible.
Currently, the government intends to spend GH¢18.6 billion on interest payments, representing 25 per cent of its entire 2019 budget.
The amount is more than double the amount the government plans to spend on capital projects, and goods and services which stands at GH¢8.53 billion and GH¢6.33 billion respectively.
Speaking to the GRAPHIC BUSINESS on the sidelines of a presentation on the 2019 budget at a breakfast meeting organised by the American Chamber of Commerce Ghana (AMCHAM), Mr Quansah said the development was worrying and that the government must overcome the challenge in the medium to long-term.
No Immediate alternative
The rising interest payments is a result of the country’s growing appetite for loans to finance its projects. The country’s public debt as at September 2018 stood at GH¢159.4 billion, representing 65 per cent of GDP.
Mr Quansah noted that the country currently did not have any immediate alternative because the government’s revenue was not enough to finance all of its projects, leaving it with no other option than to borrow.
“I think it is a worrying trend but we do not have an immediate alternative. We have a budget to finance, we have people attending schools and we need to pay for their fees so if you don’t go for the loan in the immediate-term, how can you do it,” he stated.
“Worrying as it may be, that is the only option available at the moment. Over time, we however, need to move away from this practice,” he added.
Boosting revenue mobilisation
He said moving away from such a practice would require that the government adopt effective measures to boost revenue mobilisation.
“We have to do a lot more work when it comes to taxes. Our tax to GDP ratio is currently 13 per cent and we need to do more to grow this,” he noted.
On whether the measures outlined by the government was sufficient to rake in the GH¢45 billion revenue target, he said raising that amount would be a huge challenge.
“The advantage that the government has over individual consultants is that it has data that we don’t have so based on its own data, the government thinks it can raise GH¢45 billion, but from where I sit and looking at what has happened historically, I think it is challenging,” he said.
“From where I sit, it looks very challenging to say that just the compliance measures that were introduced in the budget will be sufficient to grow the revenue by about 20 per cent,” he added.
Formalisation of the economy
Mr Quansah also called for the need to formalise the economy to ensure that a lot more people in the informal sector contribute their quota to the national kitty.
Although the expansion of the tax net has featured in almost every government’s budget, he said very little had been done to achieve it.
He however, pointed out that the government’s initiative to ensure that every individual had a tax identification number (TIN) was, however, a right step to formalise the economy.
“The government has started linking data to the national identification scheme (NIS) and this is good because it will help to easily identify people. This will also enable the government to have a comprehensive data on the people, where they live, their incomes and whether they have filed their tax returns,” he stated.
“Having a TIN does not necessarily mean you will pay taxes, but it means you can be identified in the country’s data and this is a good starting point,” he added.
He, however, advised the government to set up TIN registration desks at NIS registration centre’s to ensure that people would get their TIN numbers and NIS cards at the same time.
Mr Quansah also advised individuals and businesses to be compliant in their tax obligations to the country.
“You and I chose to belong to a society and the question is, do we want to have a common expenditure? If yes, then how do we finance that expenditure?” he asked.
“If we don’t have all the companies to generate income for us, then we must contribute mainly by way of taxes. I believe that the right thing must be done, otherwise we will cripple this economy,” he added