In an interview, a tax expert, Dr Abdallah Ali-Nakyea, as part of a 10-point suggestion to make the best out of the 2023 Budget, stressed the need for strict tax enforcement to enhance compliance to close the tax gap of between 60 per cent and 86 per cent across various tax types.
For development agronomist and soil scientist, Dr Michael Abu Sakara Foster, the 2023 budget stopped short of spelling out how to effectively implement aggressive agro-based industrialisation and removing what he described as “the transactional costs” that affected production and food prices, namely fuel hikes, high energy and transportation costs, among others.
In his view, both were the fundamental challenges facing the economy.
Two bodies, the Trades Union Congress (TUC) and the Institute of Economic Affairs, at their post-budget fora yesterday, also made some suggestions to the government.
While members of the TUC called for rejection of portions of the budget, the IEA rooted for the abolition or reduction of petroleum taxes and levies, the introduction of corporate tax reforms and a review of the system of public compensation-- salaries, allowances and retirement benefits, which formed a large component of recurrent expenditure.
Dr Ali-Nakyea suggested a 10-point strategy towards generating substantial revenue to help take the country out of its economic crisis.
Sharing his views on the budget with the Daily Graphic last Sunday, the tax expert, chartered account and lawyer indicated that “the Electronic Transfer Levy (E-Levy) should have been reduced to 0.5 per cent and the threshold of GH¢100 increased to GH¢200 rather than being scrapped as has been done”.
He added that the direct levies of Ghana Education Trust Fund (GETFund), the National Health Insurance Scheme (NHIS) and COVID-19 Health Levy, totalling six per cent, should have been merged into the Value Added Tax (VAT) to make them input tax deductible instead of increasing the VAT rate from 12.5 per cent to 15 per cent.
Dr Ali-Nakyea, who is also a Senior Lecturer at the University of Ghana School of Law, said Pay As You Earn (PAYE), a tax deducted from an employee's income, should have been maintained at topmost bracket of 30 per cent and the income bands rather adjusted to 35 per cent.
He stated that the tax incentive proposals in the budget were alright but must be well monitored to ensure compliance and avoid leakages.
In that regard, he called for concrete steps to enhance tax compliance and enforcement to enable the country to close the tax gap of between 60 per cent and 86 per cent across various tax types.
Illicit financial flows
Dr Ali-Nakyea further stressed the need for the country to pay more attention to addressing illicit financial flows from the natural resources sector, corruption and transfer pricing, among others.
He said the automation work being done by the Ghana Revenue Authority (GRA) should be continued so that the country could rake in “real time revenue inflows”.
On tax evasion and refunds, Dr Ali-Nakyea suggested a joint and collaborative tax audit and investigations by the GRA, Economic and Organised Crime Office (EOCO) and Financial Intelligence Centre to address the issues.
“The implementation of property taxation to the letter was equally important,” he posited.
He observed that there was a disconnect between what was read or presented as the budget, government policy and what was done in practice.
Dr Ali-Nakyea expressed the hope that if the expenditure measures would be pursued to the letter, “we may see progress”.
On the revenue side, the tax expert stated that much thought did not go into it.
With VAT, for example, he explained that the government could have easily returned to making the straight levies of GETFund, NHIL and COVID-19 Health Recovery Levy, which together come six per cent, part of the 18.5 per cent VAT rate.
That, Dr Ali-Nakyea noted, could be claimed as an input tax to augment the cash flow of businesses which were not final consumers and also contain price increases and inflation.
"The top bracket of 35 per cent for employees and self-employed persons is on the high side because it means such persons are paying taxes more than companies other than those in mining and petroleum," he further revealed.
Dr Sakara said “far-reaching” policies must be formulated to address those fundamental challenges to grow the economy and not to initiate short-term measures which would eventually not address sustained economic growth in the long-term.
In an interview with the Daily Graphic in Accra last Friday, the development agronomist and soil scientist who was the 2012 presidential candidate of the Convention People's Party (CPP), noted that the greatest news he heard in the budget was the identification of some wastages in the system such as a ban on the use of V8 and V6 vehicles except for cross country travels.
Dr Sakara stated that the budget also failed to identify areas that would make the economy grow “proactively instead of passively”.
He observed that growing the economy proactively meant that “you make overall policy changes that will grow the economy in areas like production and manufacturing; therefore the budget must address those specific areas and remove constraints”.
The development agronomist and soil scientist said growing the economy passively meant that the government was making overall policy changes in the hope that within the shortest possible time something would happen, but he said that approach was not the best.
“Getting out of where we are now is not just a matter of collecting more taxes but generating more revenue so that you can get taxes; you cannot always squeeze blood from stone,” Dr Sakara argued.
He warned that further squeezing the formal and private sectors already captured in the tax net would further shrink profits in the private sector and adversely affect taxes which would ultimately impact negatively on revenue projections.
“Already, we have seen how we have over-projected these huge taxes that we hope to collect; how do you collect these taxes in a period of austerity when you couldn't collect them when things were good and the economy was booming,” Dr Sakara further asked.
The IEA also proposed an increase in capital expenditure to foster economic growth, entrenching fiscal and debt sustainability to ensure macroeconomic stability and halting financing the budget from multilateral and other international partners.
The Director of Research of the IEA, Dr John Kwakye, at a press conference on the post-2023 Budget and Economic Policy in Accra yesterday, further suggested a reduction in the size of government, including ministries as part of the IEA proposals, abolition of the Council of State in its current form, and a review of the government’s flagship programmes, including the free Senior High School policy.
He further described the medium-term macroeconomic projections in general as unambitious.
Therefore, Dr Kwakye said: “The 2023 budget statement failed to chart a new course of restoring and sustaining macroeconomic stability and placing the economy on the path of long-term structural economic transformation”.
On petroleum taxes, Dr Kwakye called for a review of taxes in the petroleum price build-up to reduce the high ex-pump prices.
The petroleum price build-up, which included taxes such as Energy Debt Recovery Levy, the Road Fund Levy, the Energy Fund, the Price Stabilisation and Recovery Levy, Sanitation and Pollution Levy, Energy Sector Recovery Levy and Special Petroleum taxes need to be looked at again.
He said per the IEA calculations, with figures sourced from the National Petroleum Authority (NPA), some of the taxes were “duplicative or even multiplicative and constituted 81 per cent of the ex-pump prices.
“By all accounts these taxes or levies are prohibitive and exorbitant and we therefore call for their abolition or reduction as appropriate to reduce ex-pump prices,” he indicated.
The TUC members also called for the rejection of portions of the 2023 budget because some aspects, including the proposed freeze on civil and public sector employment, the revision of the E-Levy and the upward adjustment of VAT, would not be favourable to the welfare of workers.
The member associations, therefore, called on the leadership of the TUC to officially reject those aspects of the budget as they did not reflect a positive outlook for the welfare of workers in the country.
The forum, chaired by the General Secretary of the TUC, Dr Anthony Yaw Baah, brought together the executive committee members of the congress, the general secretaries of the member groups as well as the youth and women wings of the TUC.
The discussions, which lasted for about three hours, saw members raise various reservations on the budget statement, with some of them calling it an “IMF” budget.
Portions of the budget that came under scrutiny at the forum included the proposed abolition of tax exemptions and the review of salaries of workers of state entities.
The General Secretary of the General Agricultural Workers Union (GAWU), Edward Kareweh, said the government must come clean on the proposed measures outlined to rake in revenue.
He said although it was prudent for the government to revise the tax exemption regime in the country, it was equally important to widen the scope of those who would be affected.
“The government is taking away waivers but it talks of only new companies, so what happens to the existing companies that have tax exemptions. So labour must reject such portions of the budget,” Mr Kareweh said.
He also added that the revision of the E-Levy threshold was not favourable to the poor and for that matter workers in the country.
The General Secretary of the Public Services Workers Union (PSWU), Bernard Adjei, encouraged the leadership of the TUC to take another look at the government's investment in its digitisation drive.
He said when properly executed, the digitisation of the economy could help weed out corruption from the public space.
For his part, Dr Baah told the Daily Graphic in an interview after the forum that the leadership would consider the concerns raised at the forum in drafting the official position of the TUC on the budget.
He said the TUC would by Wednesday make public its official position on the budget.
“This is something we do every year after the budget and today we met and our discussion here focused on the implications of the budget to workers and that is why we concentrated on wages,” he said.