Overly Distorted Tax System Fuels Debt – Seth Terkper Urges Reform at New VAT Book Launch

Former Finance Minister and Presidential Adviser Seth Terkper has called for a comprehensive review of Ghana’s tax framework, warning that persistent distortions in the country’s revenue system are undermining fiscal stability and fueling the nation’s rising debt burden.

Speaking at the launch of his new book, “Value Added Tax in Africa: The Ghana Experience,” Terkper reflected on Ghana’s tax reform history and urged policymakers to focus on strengthening the pillars of the revenue system rather than introducing new and often regressive taxes to plug budget gaps.

“You raise revenue before you spend. So, if the revenue is distorted, you won’t have sufficient money for expenditure, and that leads to borrowing to fill the gap. And then we are going down into debt,” he cautioned.

The former Minister for Finance, who oversaw a major tax law overhaul between 2013 and 2016, said the separation of VAT, Customs, and Excise Acts during that period was meant to bring clarity and consistency.

However, he lamented that since then, old taxes removed under the VAT framework have resurfaced, in the guise of levies, further complicating compliance and administration.

“When VAT was introduced, it replaced many consumption taxes. But today, many of those taxes have returned in the form of levies,” he noted.

According to him, these policy reversals contribute to a tax system riddled with overlaps, inefficiencies, and declining public trust.

The presidential adviser on finance is calling on the government to resist the urge to keep introducing new taxes, especially during fiscal crises. He advised that the government should instead rely on mechanisms like the Stabilisation Fund during periods of revenue shortfalls, rather than turning to taxpayers for more.

Terkper’s remarks come at a time when Ghana’s debt-to-GDP ratio remains high, and the country continues to implement IMF-backed fiscal consolidation reforms. His comments serve as a timely reminder that a reliable and predictable tax system is the foundation of fiscal health.

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