January 9, 2019

Enhancing Revenue Mobilization in Ghana through Tax Compliances

Fiscal Alert 16: Enhancing Revenue Mobilization in Ghana through Tax Compliance.

Ghana’s tax/GDP (rebased) ratio currently sits below 13%. Not only is the country’s tax revenue as a share of GDP low in absolute terms, but it is also very low as a share of GDP relative to those of its African peers, pointing to the need to significantly increase tax revenue.

Developing mechanisms to improve tax revenue has, however, become challenging on at least two fronts: (i) lack of good data on tax compliance; and (ii) difficulty in finding effective instruments for improving compliance, given the institutional constraints.

One way to raise more tax revenue, therefore, is to improve the effectiveness of the tax administration system. Another important way is to improve tax compliance. This means strengthening the capacity and resources needed for better taxpayers’ services and enforcement, reviewing tax structures, and investing in skills and management systems needed to establish a productive tax system.

This fiscal alert makes recommendations on how to improve revenue mobilization in Ghana through tax compliance.
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November 19, 2018

The 2018 Fiscal Policy Objectives and Targets: What has changed?

Fiscal Alert 15: The 2018 Fiscal Policy Objectives and Targets: What has changed?

Ghana has been facing fiscal difficulties since 2012 and the effects were at the forefront of the fiscal challenges that confronted the NPP government that came into office in 2017. For most of the past six years, large persistent fiscal deficits and a rising debt burden have posed an increasingly serious policy challenge for the country. The implementation of the single spine salary structure for the public sector in 2010, coupled with a sharp rise in energy-subsidy costs and fiscal transfers, rapidly increased public spending. Consequently, the fiscal deficit rose from 4% of GDP in 2011 to 11.6% in 2012, coupled with a rapid accumulation of government payment arrears. The emergence of a large fiscal deficit and external imbalances led to a slowdown in growth, putting the country’s medium-term prospects at risk. Government’s efforts to achieve fiscal consolidation since mid-2013 were undermined by policy slippages, external shocks, and rising interest cost. As a result, the fiscal deficit remained far elevated and above its target levels, reaching 10.7% of GDP in 2013 and 10.1% in 2014 (World Bank, 2017).
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November 15, 2018

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[Occasional Paper 18] Ensuring Strong Broad-Based Economic Growth and Significant Reduction in Unemployment in Ghana

Having witnessed a decline in economic growth in the 1990s on average, Ghana recorded increased rates of economic growth in the 2000s. In 2011 and 2012, the economy of Ghana registered exceptionally high growth rates.

Even though this was partly due to the production of oil in commercial quantities, which began in December 2012, the traditional non-oil sector also saw very high growth rates in these years. However, starting from 2013, the growth of both the total and non-oil economies began to decline, reaching incredibly low rates from 2014 to 2016. In 2017, the economy appeared to have turned around, as it registered a strong growth rate. Nevertheless, the high growth rate in 2017 was induced by the oil sector because of the coming on stream of the Tweneboa Enyenra Ntomme (TEN) and Sankofa Gye Nyame oil fields.

The traditional non-oil sector continued to register low growth in 2017. As a consequence, unemployment, particularly among the youth, is soaring. To address this dangerous socioeconomic problem, strong broad-based economic growth is critically needed. Although the present government is pursuing a number of policy programmes to ensure broad-based economic growth, the weak and fragile fiscal position in which the country currently finds itself call for extreme care in policy formulation and implementation.

After conducting a thorough analysis of the government’s policy programmes, and based on clear analytical evidence, this paper provides recommendations to help the government fine-tune its policies so as to ensure policy effectiveness and the avoidance of complications.

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October 28, 2018

Strong Economic Growth And Significant Reduction In Unemployment: The Critical Issues To Address In Ghana’s 2019 Budget [Occasional Paper 17]

 [Occasional Paper 17] Strong Economic Growth And Significant Reduction In Unemployment: The Critical Issues To Address In Ghana’s 2019 Budget

Unemployment has become the most serious challenge currently confronting Ghana. Indeed, the unemployment problem has reached a crisis point, given that the rate consistently increased over the most part of the last three decades, and stood at 11.9% at the end of 2015. The overwhelming majority of the unemployed are young people, aged between 15 and 34 years. Only 10% of graduates find jobs after their national service, and available statistics show that sometimes it takes up to 10 years for a large number of graduates to secure employment. Majority of the employed are in the private sector, of which about 90% are in the informal sector. The informal sector is known for its low productivity and very low incomes. The failure of Ghana’s economy to grow at appreciable rates in order to create jobs and improve incomes and livelihoods of Ghanaians has become a major concern.  
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October 23, 2018

Strong Economic Growth And Significant Reduction In Unemployment: The Critical Issues To Address In Ghana’s 2019 Budget [6]

Policy Brief 6. Strong Economic Growth And Significant Reduction In Unemployment: The Critical Issues To Address In Ghana’s 2019 Budget

The Ghanaian economy has maintained virtually its “colonial structure” 60 years after independence as it still depends largely on cocoa, gold, timber and recently oil as the country’s main export commodities. Exported in raw and unprocessed form, these commodities fetch low prices on international markets where Ghana is a price taker, rendering the economy vulnerable to terms-of-trade shocks. The agriculture sector’s contribution to total output has been falling due to declining productivity. The manufacturing base of the economy has also been shrinking as many state-owned industries privatized years ago have closed down and many private businesses are suffocating under the weight of numerous obstacles. Services have emerged as the leading sector of the economy, but productivity and incomes are low in the sector. The combination of all these factors has slowed Ghana’s economic growth for the most part of the last two decades, with serious implications for job creation. This paper looks at how a strong and broad-based economic growth can be achieved to significantly create jobs in order to reduce unemployment in the country Read full paper
October 16, 2018

An Assessment of the Proposed US$50 Billion Century Bond for Ghana

Fiscal Alert 14: An Assessment of the Proposed US$50 Billion Century Bond for Ghana

The Minister of Finance has disclosed that the 2019 Budget will announce the issuing of a US$50 billion century bond that will provide resources to help address major challenges confronting the country, including the cedi depreciation, infrastructural deficit, and low industrial development. A successful century bond will make everybody comfortable about the future of the country’s needs for both infrastructure and foreign exchange so that we have a lot more stability. According to the Minister, the bond will be raised in bits through a shelf offering, which will allow issuers to register a security without selling the entire issue at once.

The Minister’s disclosure followed an announcement made by the President last month in China. With the country exiting the IMF program by the end of the year, the President stressed that Ghana is determined never to return to the Fund-support program. In order to do so, the government is looking seriously at how it can secure sources of long-term finance that will allow it to deal with the country’s infrastructure development and also realize the vision of a “Ghana beyond Aid”. To this end, the Ministry of Finance is considering floating an ultra-long-term-bond

This paper reviews the government’s plan to issue a US$50 billion century bond to finance infrastructure and other development projects and offer some suggestions for that initiative.

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