Economist Dr. Priscilla Twumasi Baffour has warned the government against rushing to remove taxes it promised to scrap if doing so would negatively impact national revenue.
Speaking on Joy News’ PM Express Business Edition on Thursday, February 13, she stated that while tax cuts may be politically appealing, economic reality must take precedence to avoid worsening Ghana’s fragile fiscal situation.
“It’s a difficult period, and I believe that there is nothing wrong if the government, I mean, the finance minister, comes out to say that we promised X, Y, and Z, but this is the reality—it is not possible,” she stated.
According to her, the government still enjoys goodwill from Ghanaians, and instead of hastily scrapping multiple taxes, it should focus on what is economically practical.
Dr. Baffour cautioned that if the economy’s current trajectory shifts into further instability due to revenue shortfalls, the consequences would be disastrous.
“The risk to businesses and Ghanaians as a whole is that if the trajectory that the economy is currently on switches and we enter into another phase of turbulence, it will be quite disastrous for everybody.
“It affects people in terms of standards of living. Fixed-income earners really struggle with high inflation and all that,” she explained.
She acknowledged that keeping some taxes in place might come at a political cost but stressed that economic stability must be the priority.
“Initially, it would mean some political cost, but I think that the government has a lot of room at the moment, and it should not be hasty in taking out all the taxes that it promised to remove if indeed it’s very difficult to make up for it,” she advised.
Referencing past policies, Dr. Baffour noted that the motivation behind removing what were once called “nuisance taxes” was to shift focus from taxation to production.
However, she pointed out that economic growth in Ghana takes time and cannot immediately compensate for lost tax revenue.
“The whole idea of, for example, taking out a lot of taxes, nuisance taxes as we heard some time ago, is the fact that you want to de-emphasize taxation and look at production.
“But the reality is that in our context, growth is quite difficult. It takes quite some time to be able to observe a given substantial level of growth,” she remarked.
Her comments come at a time when the government faces pressure to fulfil campaign promises of tax relief while also grappling with economic recovery efforts following years of high debt, inflation, and revenue shortfalls.
Dr. Baffour’s caution serves as a reminder that while tax relief can provide temporary relief for businesses and individuals, ensuring a stable and sustainable economy should be the ultimate goal.
ALSO READ: