The Commissioner-General of the Ghana Revenue Authority (GRA), Anthony Kwasi Sarpong, says the recent sharp recovery of the cedi has dealt a significant blow to government revenues.
However, he insists the Authority is confident of a rebound before the end of the year.
Speaking on Joy News’ PM Express Business Edition on Thursday, August 21, Mr. Sarpong explained that the cedi’s appreciation from 15 to about 10.5 to the dollar in just three months translated into a 30 per cent drop in revenue, especially at the ports.
“If you look at the duties at the port, they are denominated in foreign currency, mostly in USD. And therefore, once the exchange rate, which is overall good for the economy, dropped from 15 to about 10.5, that’s a 30% sharp drop in cedi terms. So obviously, in a split of three months, what comes to you drops by 30%,” he said.
According to him, while this short-term effect has been severe, the GRA is optimistic that lower rates will eventually stimulate imports and restore revenues.
“We are confident that because the rates are lower and the rates have come down, importers can import more. One, the amount of dollars they need is more because they are using fewer cedis to get the dollars, so they can import more.
“Number two, when it comes to the duties, again, the rates have dropped. So the amount of cedis they need to import to pay duties is also lower.
“So we believe that in the spirit of three months, while their initial stock that we’re holding gets finished and they are restocking, it’s going to be more, and we will regain the taxes from there.”
He added that the extractive industry and upstream petroleum sectors, whose taxes are also paid in dollars, have also been affected.
“Once you lose 30% from the rate point of view, you are immediately hit with a 30% drop in cedi terms. But again, that is a short-term measure as well. We want to believe that once the value has stabilised, they are also able to reduce their cost. And through that, other taxes from corporate income tax will rise, so it will also again compensate.”
Mr. Sarpong, however, stressed that structural reforms will ultimately drive revenue growth.
“One of those fundamental measures we’re talking about here is what we call the modified taxation. We’ve talked about in this country, expanding the tax base, particularly for the Micro, Small and Medium Enterprises.
“We are introducing within a month what we call the modified taxation, one to define at a minimum base taxes that certain categories of businesses will pay.”
He explained that this approach will significantly broaden the tax net.
“For example, if you are doing a business and your turnover is 200,000 a year, we are saying just pay 3% of that. That probably works out to 5000 or 3000 the whole year. That is all that you have to pay as a small, medium enterprise. It is estimated that we have over 5 million such businesses in Ghana.
“But potentially, let’s take the assumption that we’re raking 2 million of such businesses to the tax net, if on average these businesses are paying 5000 a whole year, that is 10 billion. That translates to 1 billion a year with potential to grow. So this is one of the measures that we are introducing before the end of the year.”
Beyond taxation reforms, the GRA boss also underscored the importance of public awareness.
“We’ve been doing a lot of tax education over the years, but we have come to the point where we realise that still many Ghanaians are not fully aware of their civic responsibilities insofar as contributing a bit of their income for taxation.
“And, therefore, by next month, we are launching nationwide tax education that we will do continuously, not only as GRA but with other stakeholders to make sure that awareness creation in terms of paying taxes, awareness creation in terms of how taxes are used for and means of paying taxes conveniently and easily, so that people will naturally embrace their tax responsibilities.”
He pointed out that technology and data will be central to this effort. “Data and technology is the way to go to make sure that we as GRA are ahead of the curve. So today we have the digital economy where many of the young people, they do business, commerce and means of transportation is through Uber or Bolt, they buy online. So this is the future of the taxpayer, and we must be future ready now and also into the future.”
Mr. Sarpong confirmed that a new system is being developed to capture online transactions.
“Before the end of the year, we are introducing a digital technology such that transactions that are taking place online, we have visibility of it.
“We can see the amount of value of the transaction taking place, and also importantly, deduct the tax component at the point of payment.
“This is going to be a game changer for both institutions that are outside Ghana but trading in Ghana and for institutions that are here.”
For him, despite the temporary hit from the cedi’s rebound, the combination of reforms, tax education, and digital enforcement will restore revenues and keep government finances on track.
