Mid-Year Budget Review: Gov’t told to abolish COVID-19 levy

Senior Economic Analyst of NRGI, Dr. Alex Ampaabeng

Government has been urged to strike out the COVID-19 Health Recovery Levy introduced to raise revenue to support COVID-19 expenditures and provide for related matters in 2021, ahead of the mid-year budget review.

The levy, chargeable at a rate of one percent, is calculated on the value of taxable supply in respect of the supply of goods and services made in Ghana, excluding exempt goods or services. It is also charged on the import of goods and services into the country.

But with the World Health Organisation (WHO) announcing that COVID is no longer a public health emergency of global concern, and the subsequent declaration lifting all the restrictions by President Akufo Addo a few months ago, it is seen that the levy has served its purpose.

It is in line with this that the Senior Economic Analyst of the Natural Resource Governance Institute (NRGI), Dr. Alex Ampaabeng, has said that with COVID-19 now no longer a threat there is no point in keeping the tax.

He posited that while others will say it is merely a one percent tax, he insisted that every tax serves a purpose; and since that purpose – the COVID-19 pandemic – is no longer relevant, it implies the levy has also outlived its usefulness.

Because of this, he said, government should consider ending the tax to lessen the plight of Ghanaians.

However, Dr. Ampaabeng was adamant that there is a strong likelihood of government re-introducing the toll booth levy. This, he said, is because government is left with very few avenues to raise revenue.

This notwithstanding, he observed that the toll booth levy should not be implemented in the manner it previously existed. “It would be better to come with a reformed road tax system wherein every road user pays and not only those that cross toll booths, and then we can earmark this revenue purely for roads so nobody touches it,” he explained.

If this can be done by, for instance charging saloon car operators GH₵300 a year, V8 and 4×4 users paying GH₵500 a year as well as articulator trucks and big lorries paying GH₵1,000 a year, it could bring enough revenue to undertake road projects.

“We have over two million vehicles in Ghana, just do the calculations; if averagely we collect GH₵500 per car annually that is even a better alternative to the E-levy.”

The Senior Economic Analyst of NRGI, who was speaking during an interview at the back of a ‘Summer School on Effective Resource Governance’ in Takoradi, in his general reflection on the upcoming budget review further said the 2023 budget was one of the most anxiously and widely anticipated before it was read recently.

He attributed this to the economic challenges and indications of turning to the International Monetary Fund (IMF) for a possible bailout. But with this over, he said, the current focus is on the first update that will show “where we are as a country”.

“This is because a lot has happened; economically we have seen profits or revenues of banks and financial institutions wiped out because of government’s Domestic Debt Exchange Programme (DDEP).”

He added that: “We have seen real impacts or consequences on the economy as a result of the DDEP. So, it has not been an easy year and we are working on a heavy macroeconomic target – fiscal consolidation; and what this means is that Ghana is still expected to generate more revenue.”

However, he argued that if you look at the economy – which is more or less in a recession, the country is struggling; and with DDEP and all the difficulties in the cost of doing business, among others, one is bound to ask where government is going generate the revenue from.

“So it’s a real test going forward with this particular budget, because the IMF will still expect results; and if you look at the numbers it is not so encouraging. The only positive thing has been the Value Added Tax (VAT), which has seen over 92 percent year-on-year growth.

“I think this is the direction we expected government to go; the Ghana Revenue Authority (GRA) introducing electronic invoicing has resulted in a huge increment of VAT receipts. What this means is that there is money right here in the country; we do not need a new tax in the upcoming budget, because the economy cannot accommodate any new tax.”

What is needed, he said, is government coming back with very strong administrative strategies and mechanisms to make sure the tax net is widened to ensure more people who are supposed to pay honour their tax obligations.

“We need to go out and digitise operations in order to fish out all industries, businesses and individuals who are supposed to pay taxes,” he said.

Leave a Reply