Showing posts with label Abdallah Ali-Nakyea. Show all posts

Sunday, 24 November 2019

Extension of the National Fiscal Stabilisation Levy unfortunate

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Adnan Adams Mohammed

The government has extended the National Fiscal Stabilization levy for another five years; starting from next year to 2025.

The Finance Minister, Ken Ofori-Atta is currently seeking approval to have the National Fiscal Stabilisation Levy (NFSL) and Special Import Levy (SIL) extended for another five years from 2020 to 2025.

The National Fiscal Stabilisation Levy (NFSL) introduced in 2009, as a temporary measure to help mobilise revenue to stabilise of the economy from the fiscal slippages it suffered at the time, scrapped two years later, only to be reintroduced in 2013 to run for 18 months.

But a tax expert, Abdallah Ali-Nakyea sees the extension as unfortunate. “Unfortunately, as we have seen there is another extension and this time for 5 years to end in 2024.”

“This adds to the cost of doing business as it is a levy and thus not an allowable deduction for tax purposes although it is taken upfront”, he explained.

In reading the 2018 budget, the Finance Minister assured the business community that the government will scrap the national fiscal stabilisation (NFS) levy in 2019 after extending it beyond the original dateline of December 2017.

Given that the levy has since become a major part of government revenue mobilization in spite of its debilitating effect on the private sector, many businesses have always expressed worry over the commitment to permanently withdraw it.

While admitting the lukewarm attitude towards removing the tax, MrOfori-Atta said his outfit was committed to ending it in 2019.

He was optimistic that revenue enhancement measures announced in the 2018 budget would yield the necessary results to help make-up for the loopholes that the NFS levy is envisaged to plug. The levy is a five percent tax on the pre-tax profits of businesses.

It has however remained, prompting businesses to push for it to be scrapped. Although a sunset clause in the act that reintroduced it allowed for it to be removed in December this year, the 2018 budget announced that it will be extended until December 2019.

Meanwhile, the Member of Parliament (MP) for Tamale North, Alhassan Suhuyini has attributed some of the current economic struggles to what he said were the New Patriotic Party (NPP) government’s mismanagement of the National Fiscal Stabilization Levy.

“The stabilization levy that was introduced to regulate the market to the advantage of the consumer. This government has mismanaged that levy; the application of that levy, and I think that is why we have this problem,” the MP said.

Mr. Suhuyini recalled that at some point, the levy was to aid in storing up strategic fuel stock.

“Farm tanks were supposed to have been constructed around the country so that as we enjoy that windfall at the time, we would have some stock available for times like this. But this government has mismanaged and misapplied that levy that today, it has no impact on the consumer,” the former broadcaster stated and further maintained that, the NPP “has no excuse than to make life better.”

This is because conditions are better than when the NDC was struggling with power crisis and rising fuel prices on the world market.

The levy is paid by financial institutions, insurance companies, as well as companies, providing mining support services to support the economy to put government’s fiscal plans on the right footing in light of negative externalities.

Per the law that introduced the NFSL, a sunset clause stated for it to be scrapped in 2015, but was extended for another 2 years and was expected to lapse in 2017. However, according to the government, due to its commitment to key social programs, it decided to extend it again for another 2 years to expire in 2019.

Sunday, 29 September 2019

Tax expert proposes solution to staggering budget overruns

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Adnan Adams Mohammed

A tax expert and a member of the Tax Justice Network has reiterated the need for a more efficient Budget Oversight Office or an independent Fiscal Council than the present form to help regulate government’s expenditure.

Abdallah Ali-Nakyea has doubts that the current form of the constituted Fiscal Council will be able to achieve its mandates with his reason being that the politicians would never allow technocrats to dictate economic issues.

The Fiscal Council set up by the current administration to help develop and recommend policies for the maintenance of prudent and sustainable levels of public debt among others,

The Governor of the Bank of Ghana, Dr Ernest Addison has said rising government expenditure and weakened revenue levels are the major threats to the swift stabilisation of the economy. In an interaction with the media after the Monetary Policy Committee meeting to review the health of the economy  last week, the Governor noted that the Monetary Policy Committee was also worried about continued revenue weakness which requires expenditure adjustments to contain the larger than the projected budget deficit.

“Exactly my comments, how would the Fiscal Council  be able to perform. I have mentioned this and proposed a more efficient Budget Oversight Office or an independent Fiscal Council than the present form”, Mr Ali-Nakyea has said when commenting on the statement by the BoG Governor.

He explained that, “it would be better if the politicians would allow technocrats to dictate economic issues to them. This is to avoid the order of day where politicians are bent on fulfilling campaign promises at all cost. Hear the Governor, high expenditure unmatched by revenue mobilization so why can’t we readjust some of the expenditures which are not immediate and cannot spur economic growth to generate revenues to be taxed to increase domestic resource mobilization?

“Why did we not approach the financial sector reforms in a more systematic approach than the “Big Bang” approach because domestic resource mobilization is not only through taxation but also savings which can be channeled into production through investments as well as enabling government to borrow through treasury bills and bonds which these financial institutions will patronize.”

The Fiscal Council, which among its other responsibilities is to ensure that fiscal balance is maintained at a sustainable level and the management of fiscal risks in a judicious manner, to achieve effectiveness, efficiency and value for money in public expenditure. The Council is to also monitor the performance of the government budget with regards to compliance with fiscal rules and targets, for instance, the budget deficit of not more than 5% of GDP.

But, the tax expert is not comfortable with the current state of the economy, especially with the fiscal management, nine months after being into office.

He lays his frustrations as, “Now here we are and heading in a much worse direction because we are entering the last quarter of the year and the Governor’s statement that the tax measures may start to yield fruits is not realistic.

“The GRA has set up a Task Force to as it were chase outstanding debts but I can assure you the response will be negligible because one cannot squeeze water out of stone. A lot of these businesses have their investments locked up in the collapsed financial institutions and the Receivers are not making any meaningful progress in payments to free these funds so they can honour their tax obligations and other indebtedness.”

“The chain effect is wide and frightening”, Mr Ali-Nakyea has alarmed.

“Sorry for my plenty economic analysis this holiday oooo but as economists, the managers of the economy should have considered the dynamic analysis of their policy impact rather than the static analysis I believe informed some of their policies, such as the method of the financial sector cleanup”, he added.

Apparently, the Governor of the Bank of Ghana is optimistic that, despite this challenge the situation would improve “full implementation of the new tax measures will likely impact revenue performance in the last quarter”.

This, he also believed that could help achieve the fiscal deficit target set for the year.  “If the fiscal situation was better and stable we would have gone down on the policy rate” he added.
He said we should not forget about the fact that Budget is particularly dependent on non-resident financing and we don’t want to take steps that would jeopardize the situation.
Dr Addison has also shown satisfaction with the level of compliance by some businesses in pricing only in cedis rather than foreign currencies. 

He said they took these steps to enforce regulations on foreign exchange because of its impact on the local currency and the exchange rate.

“A careful look at the various adverts in the newspapers has even shown that more companies are now quoting in cedis,” he said.

This remarkable comment comes some few days after the Economists Intelligence Unit (EIU) in their September report warned of some volatility for the cedis in 2019 and even going forward 2023.
The Unit argued that the cedi will remain prone to periods of volatility, given the country's exposure to movements in commodity prices, “currency will weaken to GH¢6.47 to $1 in 2023”.
But responding to these concerns the Governor said things are rather going to get better for the cedi as the central bank reserves are in strong position than previously.

“With very strong reserves and we have what it takes to support and firmly stabilize the cedi in the coming months,” Dr Addison said.

He added once the fundamentals are right and the interest rate well positioned, then things should be firmly stabilised going forward.

According to him, the country’s total foreign reserves should hit about US$9 billion from the last quarter of this year.  

Sunday, 30 June 2019

E-commerce transactions to be taxed soon

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The Ghana Revenue Authority has commenced processes to enable it to impose taxes on businesses that sell products and services on the internet including Facebook.

However, with the nature of the cyberspace, some analysts have cast doubt about the GRA’s ability to monitor and tax online businesses.

But the GRA says it is currently drafting modalities to enable it to tax online businesses. Edward Gyamerah, a Deputy Commissioner at the Large Tax Payer Office at the GRA said: “Currently, we have a project team that is looking at how to tax the digital economy. The project team is working on developing modalities. We hope that they will come out with their draft for us to share with stakeholders,” Mr. Gyamerah stated.

Millions of commercial transactions take place on the internet every day. Hundreds of businesses operating on the internet have virtually no boundary or monitored to ascertain the volume or value of those transactions.

With the growth of the Cyberspace, a lot of businesses operating in Ghana, are veering away from the conventional way of selling in shops to posting their products and services on the internet; a move that makes it difficult for the GRA in its quest to widen the tax net.

Tax analyst, Abdallah Ali-Nakyea believes the Authority needs to build capacity to achieve this aim.

“It’s not peculiar to Ghana. It’s a challenge across the world. And so what they will need is more support in terms of recruiting IT experts who can assist them in tracking and tracing some of the operators on the digital platforms,” he told Citi News at the sidelines of a public lecture organized by the Institute of Chartered Accountant Ghana (ICAG).