Taxes, User Fees To Go Up

Business leaders will be watching what taxes Finance Minister, Dr Kwabena Duffour has in his portfolio

Indications gathered by the Graphic Business suggest that the government is likely to review upwards some taxes and user fees in order to make up for the shortfall in revenue for this year.

Government’s revenue collection has not been robust for this year, with revenue targets expected to be missed for the year.

The generally slow economic outlook and government’s own austere measures aimed at fiscal consolidation have contributed to the slow pace of economic activity.

That has been necessitated by the government’s adoption of a stabilisation budget, as opposed to the growth and stabilisation budget submitted earlier in the year.

The high twin fiscal and budget deficits incurred during the past two years have eroded major macro-economic gains that made the economy robust.

Such is the magnitude of government’s stabilisation programme that it has revised growth rates downwards to 4.7 per cent of Gross Domestic Product (GDP).

This was on account of high spending with budget deficit hovering around 24.2 per cent at the end last year and imbalances in the economy which the government says needed to be addressed.

According to the Centre for Policy Analysis (CEPA), an economic think tank, fiscal performance in the first half of 2009 was characterised by a revenue and grants outrun that fell short of the budgetary target by 7.8 per cent.

Total receipts, including grants, at the end of June 2009 amounted to 13.9 per cent of GDP, CEPA stated in its review of the supplementary budget statement.

According to Dr Joe Abbey, the Executive Director of CEPA, the outturn missed the budget estimate of 15.0 per cent of GDP for the period and was below the 14.6 percent of GDP for the corresponding period in 2008.

Analysts say the shortfall was both in respect of the domestic revenue - a mid-year outcome of 11.1 per cent of GDP, compared to a budgeted 11.9 per cent of GDP and grants (including debt relief) - which registered an outturn of 2.7 per cent of GDP, compared to the programme target of 3.1 per cent of GDP.

In view of the shortfall in this year’s revenue targets, the sources indicated that the government aimed at reviewing taxes and user fees upwards to get the fiscal space to operate government machinery.

Domestic Revenue
Government domestic revenue has also been wobbly for most part of the year.

August year-to-date receipts in respect of domestic revenue amounted to GH¢3,319.3 million (15.3 per cent of GDP), compared to GH¢2,918.7 million (13.5 per cent of GDP) recorded for the same period in 2008.

The outturn also represents only 53.8 percent of the annual budget estimate.

Against this backdrop, CEPA 2009 projected outturn for domestic revenue is GH¢5732.6 million, equivalent to 26.5 per cent of GDP, comprising GH¢5047.0 million (23.3 per cen of GDP) of tax revenue and GH¢685.6 million (3.2 per cent of GDP) of non-tax revenue.

“The forecast shows domestic revenue ending the year 7.1 per cent below its budgetary target of GH¢6,172.1 million or 28.5 per cent of GDP,” CEPA noted.

It is against this background and the Graphic Business has been hinted of an upward adjustment in road tolls, various licensing fees and other user fees to shore up government revenue.

Officials at the Ministry of Finance and Economic Planning are tight-lipped on what the government needs to do to shore up the revenue gap, although there are clear indications that taxes and user fees are definitely going to be raised.

A Deputy Minister of Finance, Mr Seth Terkpeh, had earlier in the year indicated that the government intended to increase taxes and other fees in the next budget.

But businesses are not too enthused about any upward increases in taxes. They point at the recently introduced National Stabilisation Levy and the Talk Time Tax as some of the taxes that are over-stretching the over-burdened business community.

Corporate tax in the country currently stands at 30 per cent, while companies listed on the stock market pay 25 per cent as taxes.

The previous government also introduced the National Reconstruction Levy during the early days of its administration. However, the government phased out the three-year programme and went further to reduce corporate taxes.

Experts have stated that the country is not competitive when it comes to taxes, but given the conditionalities of the Bretton Woods institutions, the government has to take the path of stabilisation.

According to CEPA, the government has agreed with the IMF to take corrective measures in order to remain within the programme budget deficit ceiling of 9.4 per cent of GDP in order not to crowd out the private sector from the domestic credit market.

These measures include adjustments to expenditures and shoring up domestic revenue to cater for certain types of expenditure.

Businesses are again worried; given the high cost of doing business, any increases in taxes and other user fees will have adverse effects on their operations.

Reports from the Bank of Ghana Business Confidence Survey earlier in the year had shown low investor confidence. However, businesses were optimistic about future sprospects of the economy.

It is the fear of many business associations that while business confidence is beginning to show positive signs, higher taxes and increased user fees will further make the business community apprehensive about the future outlook of the economy.

They point to rising interest rates and the seemingly crowding out of the private sector as result of government’s heavy borrowing from the banks as some of the difficulties in the private sector. Interest rates are between 30 and 35 per cent, making capital very expensive.

But the government contends that it needs to take pragmatic measures to stabilise the economy in anticipation of future growth prospects. GB Share Your Thoughts on this article Name Email Location Comments Graphic Ghana may edit your comments and not all comments will be published