Tell Ghanaians how cost of running government is being reduced – IMANI to Government

President of IMANI Africa, Franklin Cudjoe says amidst the fiscal measures introduced by government to boost revenue, it was equally important for the Finance Minister to have likewise come clear on measures it has adopted in bringing public expenditure down and under greater control.

“The Finance Minister acknowledged the need for closing revenue loopholes, going after corrupt persons who evade taxes. He could have also suggested ways government is reducing its cost of running government, which quite clearly is a large one,” he wrote in a post on Facebook Thursday.

Based on the underperformance for the first five months of 2018, we will end the year with an estimated deficit of 4.9% of GDP compared to the programmed target of 4.5%, resulting in a fiscal gap of GHs870 million, unless we immediately implement some fiscal measures, the Finance Minister, Ken Ofori Atta indicated in his mid-year Budget Review presented to parliament on Thursday, July, 19, 2018.

In his reaction to the 2018 Budget Review presented to parliament on Thursday, President of the Policy Think tank[IMANI], Cudjoe said: “Looks to me if we radically reduced income taxes for all bands of income earners and rather introduced a 15% flat tax for all might be more inclusive.”

Meanwhile, Cudjoe revealed IMANI will soon present a paper on property taxation for consideration by the Finance minister.

Contrary to speculations that VAT and NHIL levy will be increased astronomically, the Finance Minister announced, “there won’t be any increase in VAT.”

He, however, announced that the Health Insurance Fund Levy and the GETFund components from the VAT have been separated and will now have straight levies of 2.5 percent.

“Both the Health Insurance Fund and the GETFund levies will continue to be 2.5 percent each, while the applicable VAT rate is 12.5 percent,” the Finance Minister, Ken Ofori Atta said during the Mid-Year Budget review on Thursday.

But critics have strongly contested government’s claim that it has not increased VAT in the 2018 mid-year review budget.

Former Minister of Finance under the Mahama administration, Seth Terpker urged Ghanaians not to jubilate that the Finance Minister has been economical with the truth.

“Ghana’s VAT rate is 17.5 percent and that includes NHIL (2.5%) and GETFund (2.5 %). Removing them from the VAT base and making them specific rates (instead of ad valorem) and increasing that rate to earn more revenue (quoting Hon Kwarteng) is a ruse.

“It is a VAT increase in disguise. Businesses should not rejoice yet because they cannot claim Input Tax Credit/refunds on 5% of the current 17.5 percent rate.

“Already, the Flat Rate is denying some registered businesses refunds and Input Tax Credit.

“The measure amounts to a parallel Sales Tax regime that the VAT replaced. It is a retrogressive step and further mutilation of the VAT regime,” Mr. Terkper explained.

Read Cudjoe’s full post

I have been pursuing personal business interests for much of the day. Just going over the critical notes on taxes as presented by the finance minister. Great tactical retreat on the proposed tax assault that was fairly rumoured by persons closer to government.

Luxury Tax on 3.0 sized engines- Sounds fair although if I bought a Ferrari with a 2.8 engine capacity looks like gaming the tax. Ferrari is not a cheap car.????

Increased PAYE for earners above Ghc 10k sounds fair although there might be people revising salaries to allowances. ????

Conversion of 2.5% VAT on NHIL and 2.5% GETFUND to flat levies actually increases the burden on Ghanaians. VAT is an added value service not based on the ‘raw’ value of a product, just to put it in simple terms.

Looks to me if we radically reduced income taxes for all bands of income earners and rather introduced a 15% flat tax for all might be more inclusive.

The Finance Minister acknowledged the need for closing revenue loopholes, going after corrupt persons who evade taxes. He could have also suggested ways government is reducing its cost of running government, which quite clearly is a large one. Great he will continue engaging stakeholders including think tanks. IMANI will send over the paper on property taxation the Finance minister asked for. More later.