Read how IEA’s Kwakye reacted to Bawumia’s ‘mate’ to the ‘driver-President’ comment

Director of Research at the Institute of Economic Affairs (IEA), Dr John Kwakye has reacted to the comment by Vice President Dr Mahamudu Bawumia who said that the Economic Management Team (EMT) which he heads does not have decision-making powers.

Dr Bawumia said the EMT only advised the cabinet.

As head of the EMT, he had been blamed for the economic challenges that Ghana is facing.

But delivering his address at the University of Professional Studies, Accra (UPSA) on Wednesday, February 7, Dr Bawumia said “Thankfully, I was appointed as chair of the EMT, as a sub-committee to Cabinet we do not have decision-making powers, but I am very proud of the quality of advice we have been providing over the years to Cabinet.

“As vice president, I was asked by the president to assist in solving the problems that were inhibiting the economy. my approach was to help formalize the economy through digitalization as stated in our 2016 manifesto.”

In write up assessing the address of te Vice President, Dr Kwakye said that “Dr. Bawumia portrayed his role in the Government as a ‘mate’ to the ‘driver-President.’ Even as the chair of the Economic Management Team (EMG), Dr. Bawumia said his—and the EMT’s—role was only advisory, with the President making the decisions. Dr. Bawumia said the important and specific portfolio assigned to him is ‘digitization.’ In that regard, Dr. Bawumia presented a litany of measures he has taken and their impact, which, to say the least, is quite impressive! They include areas such as: digital address, national identification, mobile money interoperability, ports services, health delivery, NHIS, passports, DVLA, motor insurance, births and deaths registry, electricity and water transactions, e-government, etc, etc.

“Dr. Bawumia stated that by limiting the human-to-human interface in economic and financial transactions, digitization has reduced corruption in the public sector. The potential for digitization to reduce corruption must, of course, be recognised. The impact of digitization is something that is always difficult to quantify. Nevertheless, as economists, we know that by limiting time and space in conducting economic transactions,
digitization increases efficiency that translates into higher economic output and growth.

“This growth may not be entirely captured in the GDP as is currently measured. It would require that the GDP measurement is revised periodically to take account of emerging activities in the application of technology. Having said that, it must be emphasised that digitization cannot be said to the ‘be-it-all,’ which, exclusively, would transform the economy and elevate growth. Also important are tangible factors like infrastructure, agriculture, industry, human capital, financial resources, etc., which Dr. Bawumia, rightly, intends to given attention to as he spelled out in his vision.”

Dr Bawumia also promised to abolish the e-levy.

Regarding this promise, Dr Kwakye said “Dr. Bawumia bemoaned Ghana’s low revenue effort, attributing it to the narrow tax net, tax loopholes, and the complex tax system, among others. He promised to streamline the tax system to increase collections, including by simplifying corporate tax and VAT, introducing a flat tax rate and promoting digitization of the tax filing system.

“As we saw numerous taxes being introduced by the Government, some of us wondered whether it was this same Government that had promised to move policy “from taxation to production,” a promise that was championed by Dr. Bawumia. As economists, we are all aware of the Laffer Curve that suggests that governments can collect taxes only up to a point when noncompliance will set in, leading to diminishing tax collections. By proposing to take the above measures to simplify and reduce taxes, it is obvious that Dr. Bawumia was not in charge of Government’s tax policy, which was also partly being driven by the IMF, and that his thinking is very much in line with orthodox economics.

“Dr. Bawumia also promised not to tax digital payments, and in, particular, to scrap the e-levy. This action is also to be commended and welcomed. Some of us have long argued that the e-levy amounted to multiple taxation and that it was not a justified tax to the extent that it was levied on ‘financial transfers’ rather than ‘financial transactions.’ Taxes should only be charged on incomes and transactions. Therefore, while I do not have any problem with the levying of e-commerce, which are transactions, I have a problem with levying money transfers, which are not transactions.”