An economist at the University of Ghana (UG) has proposed that tax reforms should be based on evident-based models, which are able to predict how much the country will benefit from them.
Professor Robert Darko Osei of the Institute Statistical, Social and Economic Research (ISSER-UG) argued that though the recently announced tax reliefs are geared towards the growth of the private sector, it was important for stakeholders to know how much each of the reforms represents on government revenues to inform policy making and discourse.
“As an economist that also believes that government must create space for the private sector to actually propel growth, I think that some of the policies are actually in the right direction. But it will be useful to simulate some of these policies and see what the distribution effects are,” he noted.
He said this in Accra at the introduction of GHAMOD, a tax-benefit microsimulation model for Ghana, developed by the United Nations University (UNU-WIDER), in collaboration with ISSER, University of Essex-England and the University of Tampere-Finland.
Professor Osei said it was essential the country moved away from guesswork to a more evident-based model that will help reduce mistakes with respect to tax reforms.
“If somebody came and then said if we increase petroleum taxes we will resolve all our problems, or if we increase electricity taxes we will resolve all our problems; is it true? So what we are saying is that let us all engage in what our policy options and benefits are,” he added.
The GHAMOD model, developed using data from the Ghana Living Standards Survey – round six (GLSS6), can be used for detailed coding of taxes and benefits to help policy makers.
It can also use user-defined tax and benefit policy rules to micro-data on individual and households to calculate the effects on household income, as well as social protection packages.
Developed under the UNU-WIDER SOUTHMOD project, the model is already in use in some African countries, including Zambia, Tanzania and South African as well as other countries in Europe.
“This is to essentially provide the platform where everybody can engage at almost the same level because we have the same information. So this is not an issue of the ministry saying I only have the data and I am telling you that if I increase taxes this is what would happen.
The GLSS is for everybody. We have used the GLSS and we are making that model available in a way that is non-technical. You don’t have to study economics for many years to be able to use it,” Prof. Osei noted.
Professor Jukka Pirttila of UNU-WIDER, was upbeat that GHAMOD, when adopted, will help improve government’s social protection systems and the financing of public spending, since taxes and domestic revenues can be properly projected.
“It uses data that is representative of households and individuals, and the model has been coded into a model Software language and all the tax benefits rules that the government has can be integrated. For example, the income tax package has been modelled, and similar others can also be modelled too,” Professor Jukka.
He further explained that the model can be used to simulate different types of policies so that they can be debated upon to know who benefits, and who pays how much, adding: “This is the way microsimulation is used in many countries.”
As part of efforts to facilitate the adoption of the model, a two-day work, which ended on Thursday, was also held for stakeholders from the University of Ghana, the Ghana Statistical Service, National Development Planning Commission, Bank of Ghana, and the Ministry of Finance.
Source: B&FT
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