The Finance Minister, Ken Ofori-Atta, might not have announced an increase in the value added tax (VAT) as widely speculated but he sure did enough to ensure he is getting something to shore up his kitty.
Last year, government revenue fell by about GH¢1.6 billion of what was projected; in the first five months of this year, revenue, again, has fallen by more than GH¢1.4 billion of the target.
But with all eyes on Mr. Ofori-Atta when he presented the 2018 Mid-Year Budget Review on the floor of parliament yesterday, he elected to deploy several innocuous tax policies which may seem insignificant on their own but whose cumulative effect may just have the same impact just as an increase in the VAT.
According to the Finance Minister, the 2.5 percent levy each charged on goods and services in favour of the National Health Insurance and GETFund, will now be converted into a straight levy. Some analysts suspect, however, that this direct computation could increase the amounts collected.
The Minister also announced the imposition of taxes on vehicles with engine capacities of more than 3.0 litres as well as a review of Personal Income Tax to include an additional band of GH¢10,000 and above per month at a rate of 35 percent.
Mr. Ofori-Atta is confident that these measures should fetch the needed revenues to prevent a relapse of government’s fiscal consolidation efforts.
Over the years, talks about widening the tax net have not seen much results, perhaps, due to the appetite for settling for measures which provide quick returns similar to the measures which were announced yesterday.
Clearly, the meat of the entire tax policy measures announced yesterday was ensuring tax compliance and plugging existing revenue loopholes.
According to Mr. Ofori-Atta, “Investigations we have undertaken show inbound leakages on goods arriving in the country, significant outstanding tax debts, abuse of suspense regime in the area of warehousing, transit trade, and free zones, and tax audit issues such as limited coverage, low auditor productivity, and low audit yields.”
He went on to say that: “We are rolling out major initiatives to address these tax compliance issues. Mr. Speaker, these initiatives will include prosecutions of tax evaders and corrupt tax officials, a special VAT task force to ensure enforcement and deepen VAT penetration from the current low levels of 11 percent, and institutional reforms at GRA,” he added.
Tax compliance in the telecommunications industry is expected to be boosted by the implementation of the Common Platform for Communications Traffic Monitoring, revenue assurance, mobile money monitoring, and fraud management.
This controversial common platform being championed by the Communications Ministry has already been a subject of a couple of legal suits but government remains unfazed as it looks to see it through to its logical conclusion.
The Common Platform, among other things, is aimed at providing government with an accurate and comprehensive view of telecom revenues in order to verify tax compliance and to ensure the comprehensive billing and collection of all telecom-related taxes, levies, and regulatory fees.
Yet, again, a long-term problem with revenue shortfalls will be fixed with a short-term solution that deepens the tax net rather than widen it. Much of what needs to be done to improve government revenue lies with the desire to shift the focus from taxation to production, that is if it is delivered.