Business News Mon, 22 Jul 2019

Revise user fees to increase non-tax revenue – IFS to government

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The Institute of Fiscal Studies (IFS) has advised government to revise its user fees to increase non-tax revenue.

Addressing the media on IFS’s review of the economy ahead of the mid-year budget presentation, an Economist at IFS, Leslie Dwight Mensah said government must strengthen the administration and mobilisation of non-direct taxes, where most of the tax revenue undershoot has been concentrated since 2017 as a way to improve revenue performance.

For this to be achieved, Mr. Dwight Mensah said user charges levied by public agencies whose real values have declined due to little or no adjustment for extended periods must be revised.

According to him, “the underperformance with tax revenues has come from areas that benefitted from tax cuts and we’re asking the government to intensify its efforts in those specific areas”.

The country over the years has had some challenges with revenue mobilization in terms of raising the required taxes to match the level of economic activities.

Government last year projected to collect about GH¢40 billion but missed out on this target by a little over 5%.

The Country’s tax-to-GDP ratio is said to be around 12%, even though according to the Finance Minister, government should be doing about 20%.

Government, in the 2018 budget, granted tax exemptions to some manufacturers as well as removing some nuisance taxes on some imported items including spare parts.

There have been calls on government to review the tax exemptions granted to investors and businesses, which experts say is causing it to lose more than $2 billion.

Speaking on the issue, the economist at IFS said the tax exemptions introduced by government has brought distortions in businesses.

“It’s probably not appropriate to say that well let’s reimpose the taxes because what has happened also is that the tax cuts as well as other changes that have been made to the taxes; the flat rate, the VAT... they have introduced distortions and caused a lot of stress to businesses and that is the thing with a lot of tax changes in a short period of time...So what we’re saying is they should appreciate where the tax revenue shortfalls are concentrated and then do more in those areas”, he added.

The Finance Minister, Ken Ofori Atta is expected to appear before Parliament on Monday, July 29 to present this year's mid-year budget review.

Source: www.ghanaweb.com
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