Ofori-Atta presents bitter-sweet budget for 2022

The 2023 budget and economic policy must prioritise economic stability and recovery, with local solutions at the centre, says the Ghana National Chamber of Commerce and Industry GNCCI and the Association of Ghana Industries (AGI).
File photo: Finance Minister Ken Ofori-Atta going to present a budget in parliament
  • New 1.75% has been slapped on electronic transactions
  • GH¢10bn to be committed to YouStart initiative
  • Targets GH¢100bn in revenue

It was mixed feelings all over the country as the 2022 budget sought to offer hope to young people with a new initiative to create jobs, while at the same time introducing a new tax on electronic payments that has finally included mobile money transactions.

As some were happy with the prospect of the creating employment through a new initiative dubbed ‘YouStart’, others were discontented over the introduction of a new 1.75 percent tax on electronic transactions including mobile money payments, bank transfers, merchant payments and inward remittances.

Finance Minister Ken Ofori-Atta said introduction of the ‘Electronic Transaction Levy or E-Levy’ was premised on the enormous opportunity mobile money transactions offer to rope-in the informal sector into the tax net, given players’ high use of the platform.

“It is becoming clear there exists enormous potential to increase tax revenues by bringing into the tax bracket transactions that could be best defined as being undertaken in the informal economy.  After considerable deliberations, government has decided to place a levy on all electronic transactions to widen the tax net and rope-in the informal sector.

“This shall be known as the Electronic Transaction Levy or E-Levy.  Electronic transactions covering mobile money payments, bank transfers, merchant payments and inward remittances will be charged at an applicable rate of 1.75 percent that shall be borne by the sender except inward remittances, which will be borne by the recipient,” he said.

Commenting on concerns over possibilities of the E-Levy discouraging financial inclusion efforts, Mr. Ofori-Atta said the move won’t have any negative impact on the agenda as all transactions that add up to GH¢100 or less per day (which is approximately GH¢3,000 per month) will be exempt from the levy.

YouStart to tackle unemployment

To address the high youth unemployment situation, Finance Minister Ken Ofori-Atta has announced that government has introduced a new programme dubbed ‘YouStart’ to help young people, especially graduates, start their own business with adequate capital and other necessary support.

The YouStart initiative, the minister said, will have GH¢1billion budgetary support each year to catalyse an ecosystem to create 1 million jobs – adding that partnership with the finance institutions and development partners will raise another GH¢2billion.

Furthermore, Mr. Ofori-Atta said the country’s local banks have agreed to a package that will result in increasing their SME portfolio up to GH¢5billion over the next three years, taking the total being committed to the project to GH¢10 billion.

The YouStart project, the budget stated, will support youth-led enterprises with district level loans under GH¢10,000 after 2-3 months of training; soft loans of up to GH¢50,000 to help start-ups (in particular of young graduates and school leavers) and small businesses to expand; starter packs (soft loans tied to equipment acquisition) of up to GH¢50,000 for individuals and GH¢100,000 for associations/groups; and a standardised loan package of between GH¢100,000 to GH¢400,000 at concessional rates for SMEs through financial institutions.

Commenting on the initiative, the minister said it is time for a paradigm-shift to the private sector in approaching youth unemployment, as previous interventions have not been enough to tackle it.

“We continue to have a huge number of our young people without jobs. This budget is redefining our development paradigm by focusing on the private sector, particularly on entrepreneurship development. We will build an entrepreneurial nation by aggressively implementing programmes which empower the majority of our young people to exploit their God-given talents to take risks and become job creators instead of job seekers.

“In the pursuit of this objective, we will address the challenges our existing and aspiring entrepreneurs face. These challenges include access to credit and finance, regulatory and tax burdens, lack of skills as well as mentorship. We will do this while intensifying our efforts aimed at supporting the private sector to expand and create jobs,” he said.

Revenue target vs expenditure

Government has projected total revenue and grants for 2022 will rise to GH¢100.5billion, equivalent to 20 percent of GDP – up from a projected outturn of GH¢70.3 billion equivalent to 16 percent of GDP for 2021.

Domestic revenue is estimated at GH¢99.5billion and represents an annual growth of 44 percent over the projected outturn for 2021.

The finance minister said the resource mobilisation for 2022 is underpinned by revenue policy initiatives. “The increase in domestic revenue by 44 percent is as a result of the impact from a major progressive tax policy (‘Baako P3’), complemented by improvements in tax compliance and reforms in revenue administration that we have outlined in this budget,” he said.

Total expenditure, on the other hand, is projected at GH¢137billion, equivalent to 27.4 percent of GDP. The estimate for 2022 represents a growth of 23.2 percent above the projected outturn of GH¢111.6billion, equivalent to 25.3 percent of GDP for 2021. The key drivers of expenditure growth include capital expenditure, funding of key government flagship programmes, wage bill, and interest payments.

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