As the impending implementation of new taxes in Ghana’s 2024 budget looms, a discernible discourse emerges across social media platforms, notably championed by NDC bloggers, questioning the government’s fiscal strategies and their implications on the citizenry. It begs a fundamental query: What constitutes an optimal approach for governments to generate revenue, fund development initiatives, and manage public expenditure?
At the core of a government’s revenue generation lie two primary methods: taxation and borrowing. These financial mechanisms are pivotal in fueling a nation’s progress, supporting public services, and meeting governmental obligations. A crucial yardstick in this debate is the tax-to-GDP ratio, often cited as a barometer of a nation’s fiscal health.
Comparatively, the Organization for Economic Cooperation and Development (OECD) countries, characterized by their economic prowess and development, exhibit tax-to-GDP ratios varying from 17.9% to 46.5%. Countries like Germany (22.5%), the UK (28.4%), the USA (18.5%), Norway (31.9%), and Denmark (43.5%) illustrate diverse taxation models driving their economic landscapes.
In stark contrast, Ghana boasts a tax-to-GDP ratio of 13.9%, significantly lower than its international counterparts. Consequently, the nation frequently finds itself reliant on external borrowing, turning to OECD nations for financial aid to bridge budgetary shortfalls.
Remarkably, African countries, excluding South Africa, grapple with the lowest tax-to-GDP ratios. This fact remains especially surprising considering that South Africa, despite its challenges, stands as one of the continent’s most developed economies.
As citizens, our obligation to contribute taxes for national development is undeniable. However, the focus should pivot towards stringent vigilance against governmental wastage, corruption, and extravagant expenditures such as excessive international travel by government officials.
Preferring taxation over borrowing is a prudent fiscal stance. Borrowing spirals interest rates, placing added burdens on private businesses and triggering currency depreciation. Opting for reduced taxation might seem appealing initially, yet the eventual economic ramifications often outweigh these short-term gains. The depreciation of the local currency invariably inflates prices, leaving everyday commodities more expensive, adversely impacting purchasing power.
While the NDC’s voiced concerns over taxation warrant consideration, the imminent challenge lies in scrutinizing proposed infrastructural initiatives, like John Mahama’s $10 billion big push plan, and discerning the financing strategies behind such ambitious schemes. Will these projects be funded through the taxation they critique or resort to excessive borrowing, reminiscent of past trends that sought refuge in IMF intervention during Mahama’s tenure in 2015?
Aligning with fellow Ghanaians, I will advocate for accountability in tax usage by the government. Taxation, undoubtedly a pathway to national development, must be coupled with prudent fiscal management and judicious expenditure. The nation cannot afford extravagant expenditures under the guise of official delegations attending prolonged conferences overseas.
Looking ahead, as we approach a new fiscal year, let us foster a climate of accountability, pressing for transparent fiscal policies that ensure optimal utilization of taxpayers’ funds. A New Year characterized by fiscal prudence, responsible governance, and progressive developmental projects is indeed within reach.
Have a beautiful and happy DMB New Year. It’s Possible!