World Bank Country Director, Pierre Frank Laporte, says the only way Ghana can fix its debt to GDP ratio is not just by cutting expenditure, but by increasing revenue.
He stated that by increasing revenue in Ghana, the country would first have to shirk some of its tax practices, particularly tax exemptions while increasing efficiency in tax collection.
According to him, for a country that badly needs revenue to fix its debt to GDP ratio, Ghana grants too many tax exemptions.
He said he understood why it was important for Ghana to choose tax exemptions i.e. to attract more foreign investors into the country, but noted that empirical evidence has proven that too many tax exemptions have failed to provide the desired results.
“So you talked about efficiency, that’s one thing, to make sure that everybody pays what they should be paying. That for instance if you look at exemptions in Ghana it’s a big problem. There are too many exemptions.
“And this is a conversation we’re having with the Ministry of Finance. Very often countries think you can give so much incentives, so much concessions and exemptions to attract investors. But there are other ways that this can be done,” he said.
He added that “Empirical evidence has shown that these incentives excessively, in the long run, don’t work.”
Speaking on JoyNews’ PM Express Business Edition, he noted that there were several other pathways to attracting foreign investors while still gaining revenue.
He explained, “VAT exemptions are given to many big investors to facilitate their entry and to launch their activities. But in many countries, either you have a quick VAT refund, it’s like the investor pays his VAT and you process his refund in one month or two where’s the incentive to give the exemption when you can process the VAT very quickly.
“There are other countries that do for instance, VAT deferment. You don’t pay your VAT now, you’re exempted now but down the line the minute you start operating you’ll recover the VAT. So you will not get refunded until you go and reimburse. There are many other ways of doing it and it’s a different conversation.”
He also called on the government to also adopt property taxes.
“There are other taxes that I mean recently we launched the Country Economic Memorandum for Ghana and for instance property taxes is one where many places in the world are doing it. It’s a norm, it’s a standard in developing world, developing economies and why can’t Ghana do it?
“And today things are in digital transition that can speed the collection that can make sure that you capture everyone. There are many other things that can be done and I know Mr. Finance is …we talk about it all the time. I know that reflections are ongoing.”