Seth Terkper, a former finance minister has described as overly ambitious the government’s revenue targets for the 2022 fiscal year.
Ken Ofori-Atta, the Minister for Finance stated in the 2022 Budget Statement that the government is aiming at increasing the tax-to-GDP ratio from 16% to 20% in 2022.
Total revenues in 2020 fell by GHC11.93 billion, equivalent to 3.1% of GDP, while total expenditures increased by GHC14.08 billion, equivalent to 3.7% of GDP.
Although the government has missed its revenue targets over the years, it is still hopeful that it can generate GHC100.5 billion in revenue in 2022.
But speaking at a 2022 Budget Review organized by PFM-Tax Africa Network, Seth Terkper noted that a 17% revenue target of GDP will be a feasible projection by the government.
“I said it was over-ambitious because we did some numbers to show that, for instance, the government is expecting 20% of revenue to GDP ratio and GRA for the first time will hit 17.5%. The last time we hit 17.5% was pre-rebasing (the first one not the second one) and the most optimistic we reach was 15% close to 16% in 2015.
“So, we are not even talking about the tax to GDP ratio of 17% which is the Sub-Sahara African middle-income average which is where Ghana is. But we’re talking about shooting this thing (revenue to GDP) up from 13% that’s the average that we’re doing now. Not even by 5 percentage points to 18% and that’s still even ambitious,” he noted.
Ghana’s revenue-to-GDP ratio low
The Finance Minister, Ken Ofori-Atta, earlier decried the country’s low revenue mobilization, saying that Ghana’s revenue-to-GDP ratio is embarrassingly low.
Speaking with Kweku Adoboli on Asaase Business Round Table on Thursday (18 November 2021), Ofori-Atta said the government is working with other government agencies to plug loopholes in the country’s tax collection.
“We’re embarrassingly low at 12 to 13% of revenue to GDP,” he said “and that has to change. We launched the Revenue Assurance and Compliance Enforcement (RACE), in which we are really combining the Ministry of Finance, GRA [Ghana Revenue Authority] and the security agencies to make sure we plug areas such as the mineral areas – gold – moving to petroleum bunkering, the border control, etc.
Resource mobilisation for 2022
During his presentation of the 2022 Budget Statement and Economic Policy, Ofori-Atta said the government expects total revenue for next year to increase by 20% of GDP, against 16% of GDP for 2021.
“Total revenue and grants for 2022 are projected to rise to GHC100.5 billion, equivalent to 20.0% of GDP, up from a projected outturn of GHC70.3 billion, equivalent to 16% of GDP for 2021.
“Domestic revenue is estimated at GHC99.5 billion and represents an annual growth of 44% over the projected outturn for 2021,” he said.
Tax efficiency
As part of efforts to facilitate effective and efficient mobilisation of taxes in Ghana, the vice-president, Dr Mahamudu Bawumia, launched the Revenue Assurance and Compliance Enforcement (RACE) initiative in August this year, as promised in the 2021 Mid-Year Budget Review.
In the first half of 2021 alone, the GRA experienced a GHC212 million shortfall in tax revenue.
The GRA collected GHC25.89 billion in tax revenue, as opposed to the GHC26.1 billion targeted for the period.
RACE is expected to identify and eliminate revenue leakages while reinforcing the culture of compliance, especially in areas such as petroleum bunkering, mineral exports, port operations, goods transit, warehousing and free zone operations.
Nicholas Brown
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