The Vice President of Ghana, Alhaji Dr Mahamudu Bawumia, has expressed digitalisation as the only way to fix the perennial shortfall of domestic revenue that plagues all developing countries including Ghana.
Dr Bawumia said all developing countries face a conundrum in that they are unable to mobilise enough revenue to finance their development due to lapses in revenue generation.
The Vice President said this forces developing countries to borrow for development, which ends up having more harmful effects on their economies down the line.
The vaunted economist said the only way to address this problem is through a system of digitalisation which enables the widening of the tax net to include all eligible taxpayers to fix the domestic revenue shortfall.
Dr Mahamudu Bawumia made his comments during his keynote address at the 10th annual International Tax Conference of the Chartered Institute of Taxation, Ghana, held under the theme: ‘Improving domestic revenue mobilisation, a consultative and inclusive approach’.
A Tax Conundrum
Dr Bawumia said almost all developing countries face a domestic revenue shortfall due to a myriad of simple and complex issues that they share in common.
“Many developing countries have found it difficult to reach high levels of domestic revenue mobilisation because their economies are characterised by a number of features,” the Vice President said.
Dr Bawumia pointed to nine key issues which make it impossible for developing countries to raise enough revenue, including a lack of unique identification, no functioning address systems, indiscipline, corruption, lawlessness, inefficient government bureaucracies, active noncompliance with taxes, cash dominance of the economic systems and financial exclusion of a large segment of the population.
“Many developing countries have found it difficult to reach high levels of domestic revenue mobilisation because their economies are characterised by a number of features. For these developing countries that we’re talking about, in the presence of these characteristics…you can have as many tax laws or tax increases as you want but you’re unlikely to achieve the goals of a significant increase in domestic revenue mobilisation,” Dr Bawumia said.
“Unfortunately, rather than addressing these shortcomings, the focus of economic management in many developing countries, including Ghana, have focused on crisis management…governments have by and large not focused on these underlying features and characteristics that make the mobilisation of domestic revenue difficult.”
Dr Bawumia said the NPP’s mission since taking over was to leverage technology to solve the aforementioned nine issues and solve the domestic revenue pitfall once and for all – hence the digitalisation agenda.
“Our goal as a government on the assumption of office was to quickly transform our economy by leveraging on technological innovations as a means to leapfrog the development process, overcome legacy problems, and improve both economic and public sector governance.
“This is why we have focused on digitalisation to build this new system, this machinery that can address this problem of domestic revenue mobilisation. You need to have a machinery that is integrated that addresses these shortcomings….” he added.
The Vice President added that contrary to people’s perception, the heart of economics, domestic revenue mobilisation and other aspects of the economy lie with digitalisation.
The Vice President revealed that the digitalisation agenda has already paid dividends in multiple ways.
The digital addresses system has provided a unique address to over 7 million properties across Ghana.
Dr Bawumia said prior to that, only about 9% of properties in the country paid property taxes and the other 91% were not captured.
With the digital address system, now significantly more properties have been documented and would be tracked down to pay their property rates.
The mobile money interoperability system has also widely solved the problem of financial exclusivity, with a significant portion of the population now part of the financial system through their mobile money wallets.
Aside from these, the digitalisation of operations at state agencies such as the Passport Office, the Driver and Vehicle Licensing Authority (DVLA) and the issuance of the Ghana card, has gone a large way to eliminating the problem of corruption and inefficient government bureaucracies whilst simultaneously significantly improving revenue, Dr Bawumia said.