2021 Budget: Economist kicks against newly introduced government taxes

Dr Adu Owusu-Sarkodie, an economics lecturer at the University of Ghana who doubles as a financial economist has opposed the newly introduced Government taxes as outlined in the 2021 Budget reading by the Caretaker Finance Minister Osei Kyei-Mensah-Bonsu.

Among the taxes proposed by the Minister were the sanitation and pollution levy (SPL), Covid-19 Health Levy of 1% on VAT, Flat Rate Scheme (VFRS) and a 1% on National Health Insurance Levy (NHIL). Government has stressed that the introduction of these taxes forms part of revenue measures to help the economy recover.

However, Dr. Owusu-Sarkodie disagrees as he notes that globally, a lot of uncertainties exist in relation to the virus.

Per his view, Ghana’s economy is at a recovery stage and it will be prudent for managers of the economy to introduce these taxes in the following years as we expect a GDP growth rate of 5 percent this year.

He shared this view in an interview with Samuel Eshun on the Happy Morning show.

“I was not expecting any new taxes this year, given the fact that the economy is at a recovery stage. In fact, the argument they gave for abolishing some nuisance taxes in the year 2017, was that some of the taxes had low yielding revenue potential and at the same time those taxes were inhibiting production so they abolished those taxes. Now that we are projecting GDP growth rate to be 5 percent this year, why don’t we wait to see the 5 percent growth then now we can impose new taxes. I was rather hoping that they would wait till next year because there is so much uncertainty about the virus, how to deal with the virus and how we can recover the economy”.

While he was not too happy about the introduction of new taxes, he was satisfied with the fact “that most of these taxes are on consumption expenditure rather than production which is good at the recovery stage”. “It would have been more challenging if it was imposed on the production stage,” he added.

The Caretaker Finance Minister, Osei Kyei Mensa Bonsu during the 2021 Budget Statement Friday said that Government is proposing the introduction of certain levies to help the economy recover.

For example, speaking on the Covid-19 Health Levy of 1% on VAT and other health-related levies, the Minister noted that these levies will be used for the procurement of vaccines and the establishment of 14 medical waste treatment facilities.