Monday, 30 October 2017

Experts varies in expectations of 2018 budget

Adnan Adams Mohammed

As the government prepares to announce its 2018 economic policies to Ghanaians through parliament, many stakeholders have spelt out their expectations of the budget.

Among such stakeholders is the Institute of Fiscal Studies (IFS). IFS has urged government to use the 2018 national budget to improve domestic revenue mobilization.

According to the institute, government must diverse its revenue targets as the current trend shows declining domestic revenue collection compared to other West African countries.

The Executive Director of the IFS, Prof. Newman Kwadwo Kusi, at a forum organized by his outfit in Accra, pointed out that government may not resort to issuing bonds if pragmatic measures are taken to improve tax compliance.

“Ghana’s actual domestic revenue has fallen short of the country’s economic potential and level at which institutional development could make,” he said, adding that “if Ghana’s domestic revenue has performed like its regional compatriots the country could have generated significantly more revenue which could have been used to pay off its fiscal deficits with extra money to pay off some of its debt”.

Prof. Kusi argued that government must take decisive steps to correct the revenue shortfall since it will be crucial in maintaining a balanced budget for infrastructure development.

He pointed out that Ghana’s programme with IMF is about prudent spending while the nation works to generate internal funds for economic growth.

“The IMF submits that the government must pay serious attention to revenue mobilization and consider it as the number one priority of the government,” he said.

Contrary to the call of IFS, the government is rather planning to reduce significantly, domestic taxes as it plans to cut the Corporate Income Tax from the current 25% to 20%.

The Finance Minister has said, the ministry is considering of reducing the tax in the 2018 budget.

This is also part of the tax cuts which was key among the numerous promises by the New Patriotic Party (NPP) ahead of the 2016 general elections.

Ken Ofori-Atta, Finance Minister maintains that diversifying tax revenue streams should prevent the overconcentration on Corporate Income Taxes (CIT).

“How do you then tap enough people to contribute so that you do not need to focus on corporate income tax as a main source of revenue…We are considering reduction in a number of taxes and the Corporate Income Tax is one of them,” he explained.

Upon assuming office, the NPP government has reviewed about fifteen (15) taxes.

In the government’s first budget, eleven taxes which were viewed as nuisance; were slashed.

In addition, four others were reviewed downwards in a bid to relieve the plight of taxpayers and ensuring equity.

Meanwhile Mr. Ken Ofori Atta has disclosed that his outfit will embark on an effort to renew the revenue collection from property taxes.

This he also believes will be highly achieved with the implementation of the national ID system.

“We are clear on the philosophy of taxes which is to reduce taxes to create economic spaces for people to operate…a corollary of that is also being able to expand the tax net and that is where the national ID becomes an important instrument,” he asserted.

Mr. Ofori Atta added, “For example our property tax system is non-existent and that is an area that we intend to look at. But our mission more will be to reduce the import of taxes on productive sectors of the economy.”

In a clear picture that, the government is struggling to mobilize needed revenue to finance the outlined budget items in the 2017 budget, figures available indicates that, government borrowings for the year would reach GH¢72 billion by December this year.

A release of the calendar covering the country's borrowings through treasury bills and bonds for the last quarter of this year.

That calendar showed that government would raise almost GH¢15 billion, through treasury bills and bonds in the last quarter of this year.

According to the data, GH¢12.7 billion would be used as roll over for maturing debts, whiles GH¢2 billion would go to government as fresh cash for its operations.

This would bring the total amount of money that government has borrowed by going this way to GH¢72 billion when you add all the amounts raised in previous quarters.

But, Prof. Kusi recommended that government must use new modules to expand the base of the tax net to improve revenue generation.

“Government must adopt a revenue mobilization strategy that seeks to strengthen revenue administration, improve tax compliance, help combat abuses and corruption, and increases that fiscal space for public investment and social spending”

“What is urgently needed this requires a closer look at revenue from the mining sector, the Freezone, the Informal sector and the state owned enterprises as well among others,” he added.

Also, government has stated that, the 2018 budget and economic policy statement will dwell largely on improving Ghana’s agricultural sector.

It revealed the commencement of a new plan in the 2018 budget to turnaround the fortunes of Ghana’s agricultural sector.

To be known as the ‘marshal plan for agriculture,’ the policy seeks to tackle all systemic challenges that have confronted Ghana’s agricultural sector, hence, inhibiting its contribution to the economy.

The Vice President, Dr. Mahamudu Bawumia disclosed this when he opened a two day international conference on the Political Economy of Economic Transformation recently.

According to him, the 2018 budget and economic policy statement will dwell largely on improving Ghana’s agric sector.

Among the numerous interventions to boost the sector’s growth are tax cuts on selected agricultural inputs and the improvement of the welfare of the farmers.

Dr. Bawumia believes the move will augment the government’s flagship planting for food and jobs program.

“Because we came in just at the beginning of the planting season…We are now preparing what we call the marshal plan for agriculture and from our point of view, the political economy of this is very clear and the economics of this makes very much sense and it will complement our planting for food and jobs program,” he stated.

The Vice President added, “The marshal plan for agriculture will ramp up the investments under the planting for food and jobs program; abolish duties on agricultural produce, processing equipment and machinery, support the development of agribusiness start-ups, de-risk and finance farming and agribusiness, open up food baskets in areas such as the Northern parts of Ghana and the Afram Plains through road construction and irrigation projects and give specific technical assistance and tax incentives to support agro-processing, packaging, market access.”

Agric’s contribution to Ghana’s GDP has been declining for some time now. Industry analysts have blamed the development on low investments.

Even though the agric sector’s contribution to GDP increased appreciably for the first quarter of 2017, from 2.8 to 7.6 percent, the continuous decline over the years has been of much concern.

The sector witnessed a continuous decline of about 13 percent up until 2016 when it began recording some marginal increase.

The sector’s growth declined massively from about 32 to 19 percent as at September 2015.

But government is confident of the impact of the new plan which will largely improve the welfare of farmers.

“The marshal plan for agriculture will be the plan that finally will make agriculture very profitable and a major source of well paying jobs, lifting the majority of our people out of poverty…Increase in the base of mechanization as well as the launch of a major pension scheme for cocoa farmers,” Dr. Bawumia remarked.