Hurried tax cuts won’t boost growth, productivity – Amoako-Tuffour

Dr. Joe Amoako-Tuffour

The Director of Research at the African Center for Economic Transformation (ACET), Dr. Joe Amoako-Tuffour, has cautioned the New Patriotic Party (NPP), government against “hurried” tax cuts, given the nature of its campaign promises en route to election victory.

Whilst Dr. Amoako-Tuffour considers some tax cuts may be obvious given their burden, he noted in an open letter to the nominated Finance Minister, Ken Ofori-Atta, that “hurried tax cuts and exemptions will do little to boost productivity or spur growth.”

The NPP indicated that, its management of the economy would see a shift in policy from taxation to production, to relieve the burden on the private sector and boost production.

To realize this shift from taxation to production, the NPP has targeted the removal or slashing of some taxes.

Dr. Amoako-Tuffour in the letter suggested that, the sound management of the economy could be achieved by accelerating economic growth, increasing revenue mobilization and prudent spending.

Acknowledging that the point of increasing revenue mobilization was somewhat at odds with the NPP’s manifesto promise, he instead noted that “policy consistency, sequencing and a fine balance between equity and efficiency matter when it comes to sharing the tax burden to finance public enterprise.”

Improving machinery for tax collection

Dr. Amoako-Tuffour also stressed the need to improve the machinery of tax collections along with the need “to close the revenue escape hatches.”

“Next to customs duties, the management of direct taxes (profit and income taxes) is one of the weakest arms of the domestic tax system and it remains a major source of revenue leaks,” the economist noted.

He lamented the “slow motion” progress in domestic revenue mobilization over the past decade, noting that the focus of collection has not shifted from reforming legislation to implementing laws efficiently.

He also noted that personnel in charge of taxation are partly to blame for the low taxes due corruption.

“Those who must collect the taxes and enforce compliance are not without blame. The corrupt and embezzlers of revenue collected have been winning.

Strung out behind them is ineffective accountability and partisan political interventions in the implementation of the tax system,” he said.

“Your commitment to action to tackle institutional habits, leakages and escape hatches offers the best opportunity in the short run to realize more non-inflationary revenues,” Dr. Amoako-Tuffour said to the nominated Finance Minister.