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Wed, Sep

ECONOMISTS PROPOSE TAX RISE TO FUND DEVELOPMENT

Business & Economy

Finance Minister Ken Ofori Atta is expected to present the government’s mid-year budget review to Parliament next week.

Finance Minister Ken Ofori Atta is expected to present the government’s mid-year budget review to Parliament next week.

 

Ahead of the presentation, some economists are proposing a tax rise to help the government raise more revenue to fund its ambitious programmes.

They are convinced the programmes of the Akufo-Addo government hold the prospects of improving on the lives of the people and the economy in general, if the required funding is raised to sustain their implementation.

                                                Aggressive tax policy for fiscal space

Among those who have sent proposals to the Finance Minister is Eric Osei-Assibey, a senior lecturer at the Depart of Economics, University of Ghana.

Dr Osei-Assibey believes the only way for government to create fiscal space on the back of ensuring declining debt is to pursue a much more aggressive tax policy measures.

While he admits the Ministry of Finance has scored high points with regards to tax administrative policies, he explains such measures take time to bring in significant additional revenues that are sustainable.

                                                  Funding free SHS

Dr Osei-Asibey, in his proposal, is asking the Finance Minister to consider imposing excise tax on the importation and use of all forms of plastic materials.

This, he says, is intended to achieve two purposes of helping in revenue enhancement and environmental conservation through improved sanitation.

He also wants the Minister to increase VAT by one per cent to 18.5% and ring-fence the proceeds to fund the flagship free senior high school programme.

“Given the volatile nature of oil revenues, this will ensure sustainable financing and to ease the heavy fiscal burden that will be imminent in the in the near future when the full programme is rolled out. I believe every social policy measure must be paid for by citizens either directly or indirectly to ensure sustainability,” he stated in his memo to the Finance Minister.

Dr Osei-Assibey’s proposal is the position championed by IMANI-Africa in its assessment of the first-year performance of the Akufo-Addo government. The policy think tank advised that tax revenues should be the main source of funding for the free SHS programme, instead of using proceeds from the country’s natural resources such as oil.

Dr Osei-Assibey also wants government to consider imposing some marginal tax on mobile money transactions, e-business/online transactions and some sophisticated financial services, as well as increase the road levy by at least 100%.

                                                    Paying tax as civic obligation

Speaking in an interview with the Daily Statesman, Dr Osei-Assibey said even though payment of taxes would never be a pleasant duty for any citizen, “we must all be prepared to meet that civic obligation.”

“We are in this business of nation building together; it’s not only government who has the responsibility. Citizens must be prepared to pay to fund our development agenda. That is the only way government can generate money to fix the bad roads, tackle the poor conditions in our hospitals and more importantly fund the bold social intervention programmes like the free SHS,” he stressed.

Touching on the proposal for one per cent increase in VAT to fund the free SHS programme, Dr Osei-Assibey said he expects Ghanaians not to see this as additional burden.

“The fact of the matter is if we were made to continue paying for the education of our wards at the SHS level, the burden on households would be far greater than paying just a little to keep it free. If we can all come together and set aside one cedi for our children to go to school free, I think we can’t get anything better than this. It’s just like the case of the National Health Insurance Scheme,” he stated.

He added: “I think if this is well explained to the people, they should be ready for it. The volatile nature of the oil proceeds does not make it the best source of funding to sustain this bold programme.”

                                                        More tax proposals

Other proposals from Dr Osei-Assibey include digitising the tax payment system in the informal sector by deploying mobile money tax payment system to increase efficiency in tax collection and compliance; making property tax payment compulsory for all property owners and deploying a number of the Nation Builders Corpse workers to move from building to building to collect these taxes. To make this work, he wants a special court to be set up in all districts to prosecute defaulting property owners to serve as a deterrent to others.

Others are reduction in the VAT threshold to broaden the tax net and intensifying the stamp tax collection from micro and small enterprises to close the tax gap in the informal sector.

                                                 Economy on tract but…

Dr Osei-Assibey believes the economy is back on tract but fears “the key issue now is sustainability and the consolidation of the gains achieved thus far.”

What is hampering the solidifying of the macroeconomics fundamentals are low revenue and slow decline in lending rates, he says. 

“The low revenue implies that government cannot spend enough particularly on infrastructure to stimulate sustainable growth; and the high lending rate also indicates the private sector’s inability to respond and take advantage of the numerous government interventions to unleash their potential for growth and create sustainable employment. While the Finance Ministry cannot do much about the latter… the former is well within its ambit to act,” Dr Assibey explained.

                                                      Hints of new taxes?

Finance Minister Ken Ofori Atta, in April, hinted of a possible introduction of new tax policies which would form part of measures to shore up the country’s domestic revenue mobilization,

He, however, fell short of confirming whether or not the new policies would result in the introduction of new taxes.

In an interview with the media on the sidelines of a conference on ‘Ghana Beyond Aid’, Mr Ofori Atta said the government would present to Parliament, a package of tax policy measures in the mid-year budget review as part of efforts to ensure sustained funding for its key programmes.

 

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