A leading member of the New Patriotic Party (NPP) Gabby Otchere Darko has said that wages, interest payments and statutory funds alone added up to 144% of Ghana’s tax revenue last year.
He said this is the reality that faces the country.
“Wages, interest payments and statutory funds alone added up to 144% of Ghana’s tax revenue last year. This is the reality,” he said in a tweet to corroborate a point made by President Nana Addo Dankwa Akufo-Addo during the May Day celebration on Sunday May 1.
President Akufo-Addo had told the Trades Union Congress (TUC) that “I have also acknowledged on several occasions that we are in difficult times, and Government has not thrown its hands in despair, and it is not looking for the easy way out. On the contrary, we are working hard to address the current challenges facing the economy, and those that relate to improving the quality of life for all Ghanaians.
“I will be the first to admit that conditions of service, in the wider public service, needs improvement. However, these should be done within budgetary constraints to ensure that we do not put excessive pressure on our public finances.
“Secretary-General, in 2021, for example, Government spent GH¢31.7 billion to pay for compensation of employees, that is wages and salaries, pensions, gratuities, and social security.
“This was paid out of a tax revenue of GH¢56.5 billion. Thus, payment for compensation for seven hundred thousand (700,000) public sector employees, alone, absorbed fifty-six percent (56%) of tax revenues in 2021. This ratio is well above the ECOWAS threshold of thirty-five percent (35%), and above the sub-Saharan Africa average of forty-three percent (43%).
“The fiscal impact becomes even stark, when we consider the three largest expenditure items, i.e., compensation of employees, interest payments and statutory funds, amounted to GH¢81.3 billion, representing one hundred and forty-four (144%) of tax revenue in 2021. This means that the total tax revenue is not enough to meet our commitments on compensation, interest payments, and statutory funds, as we have to resort to non-tax revenue and borrowing to be able to meet these obligations. This shows how rigid the budget is, and how fiscal space is non-existent or limited.
“Government has worked with the tripartite social partners in the past to deal with these issues, and we will need your support, now more than ever, in our forward march. I urge all of us to work hard to increase productivity so we can increase salary levels, and provide the basis for paying a ‘Living Wage’.”
The TUC insisted that the President Nana Addo Dankwa Akufo-Addo must remove taxes on all petroleum products as a way of showing his cares about the plight of Ghanaians.
Secretary-General of the TUC during the May Day celebration on Sunday said “The 15 pesewas reduction offered by government is not enough , suspending all taxes and levies on fuel in these challenging times will also demonstrate to Ghanaians that our government really cares and it is sensitive to the plight of the good people of Ghana.”
But Mr Akufo-Addo said “On the vexed matter of petroleum price increases, the suggestion that has been made, which has also been alluded to by the Secretary-General, is, at this moment, not a sustainable one. Removing taxes on petroleum products will reduce Government revenues by some four billion cedis (GH¢4 billion).
“At this time, when we are determined to expand Government revenues in order to increase our capacity to finance our own development, can we afford to reduce tax revenues by four billion cedis (GH¢4 billion)? Government is currently confronted by very tight financing conditions, in the wake of inadequate domestic revenue mobilisation. Indeed, some of the revenues from these same taxes on petroleum products is what is used to pay some of the salaries of some of the seven hundred thousand (700,000) public sector workers on Government’s payroll.
“We are addressing the issue of fuel price increases by implementing measures that are succeeding in stabilising the exchange rate, a key determinant of fuel prices. Government is also working hard to ensure reliable supply and availability of petroleum products, thereby preventing shortages, a phenomenon which is being experienced in some other neighbouring countries. By the same token, we are keeping the lights on in Ghana.”