Government will introduce new taxes in its mid-year budget review in July, Deputy Finance Minister Kwaku Kwarteng has said, explaining that the taxes are to drive Ghana’s industrial agenda.
According to him, the new thinking of government is that new policies are needed to move the country away from taxation to production, so as to entice more investors who, in the long run, can expand the economy’s volume and value.
“We intend to introduce some tax measures – but these taxes are not measures that deviate, nor are they measures driven by a deviation from our core economic management strategy: namely, to move away from taxation to production. We are still fully focused on that,” he told the B&FT without giving specifics.
He said that although revenue mobilisation in the first half of the year has seen some improvement, introducing new taxes will also help government fund its development policies without doing damage to the country’s fiscal space.
To him, the Akufo-Addo administration has rolled out many ambitious initiatives that constitute considerable expenditure on the budget, and in order to be able to continue financing those initiatives, revenue must perform far better than it did previously when there were no such expenditure burdens on government.
“There will be considerable gaps if you look at the projections. The options available to government are to discontinue some of the initiatives that have been hailed by the people of this country or to introduce new measures. We have chosen, at least in the short-run, to introduce these measures as a way of dealing with the revenue gaps that we see; but ultimately, we will seek to remove taxes wherever we can.”
He went on to say that: “They are not measures we are introducing as a strategy going forward; they are measures introduced specifically to deal with a difficulty that has arisen in the fiscals. But, ultimately, I am sure that we will come around to remove some of the taxes that we consider can be removed; because, in the end, we are also using taxation as a policy tool to urge growth in specific industries and also to change behaviour. These are all within the consideration of government, and that is what I mean when I say that in the long-term our strategy is to place production ahead of taxation…which we remain committed to”.
Although he indicated government is resolved to create a stable macro-economy for the private sector to propel it, he added that anything which seeks to bridge the gap between the budget and revenue will be helpful in the long-term.
“So, as I indicated, we will introduce these measures but we will keep our eye on our first strategy, which is to reduce taxes wherever we can and increase [them] under such extreme circumstances where clear gaps have to be filled,” he reiterated.
The government expects to raise some GH¢51billion from revenue and grants for whole of 2018, but this may now come under threat unless it looks to other alternatives – given the minister’s disclosure about a shortfall in mid-year targets.
Between January and June 2017, government’s total revenue and grants for the period amounted to GH¢17.5billion (8.6 percent of GDP) against a target of GH¢20.5billion (10.1 percent of GDP), which in nominal terms was 6.5 percent higher than the outturn during the same period of 2016.