Gov’t Needs to Balance Politics with Economic Realities on Taxes – Economist Dr. Priscilla Baffour Advises

Renowned economist Dr. Priscilla Baffour has urged the government to balance political promises with economic realities, particularly when it comes to taxation policies. Speaking on Joy News' PM Express Business Edition on Thursday, February 13, she emphasized the importance of pragmatism in fiscal policy to ensure economic stability.

Economist Dr. Priscilla Baffour Advises Caution on Tax Cuts Amid Economic Challenges

Addressing the government’s campaign pledge to reduce or eliminate certain taxes, Dr. Baffour acknowledged that while such promises might be politically appealing, the current economic climate demands a more measured approach.

"It’s a difficult period, and I believe that there is nothing wrong if the government, I mean, the finance minister, comes out to say that we promised X, Y, and Z, but this is the reality—it is not possible,” she stated.

She stressed that honesty and transparency about the country’s economic challenges would help the government maintain public trust, even if some tax cuts prove unsustainable in the short term.

Dr. Baffour cautioned that hasty tax rollbacks could have serious economic repercussions, potentially leading to financial instability and further economic hardship.

"The risk to businesses and Ghanaians as a whole is that if the trajectory that the economy is currently on shifts and we enter into another phase of turbulence, it will be quite disastrous for everybody," she warned.

She highlighted the particular vulnerability of fixed-income earners, who already struggle with inflation and rising living costs. Policymakers, she urged, should carefully weigh the broader economic implications before implementing sweeping tax reductions.

While acknowledging the argument for reducing “nuisance taxes” to stimulate production and economic growth, Dr. Baffour noted that such growth takes time and does not happen overnight.

"The idea behind eliminating certain taxes is to de-emphasize taxation and focus on production. As the economy grows, tax revenue naturally increases. However, in our context, achieving substantial growth takes time," she explained.

She advised the government to manage expectations and adopt a well-communicated, gradual approach to tax reform instead of a sudden loss of revenue sources.

"It’s early days, and the government still has goodwill from the public. They should capitalize on that and implement what is practical,” she remarked.

Dr. Baffour’s insights serve as a crucial reminder that economic policy should prioritize long-term stability over short-term political gains. As the government navigates fiscal challenges, she urged leaders to exercise caution, remain transparent, and make economically sound decisions that benefit the nation in the long run.

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