Business News of Sunday, 5 March 2017
Former Finance Minister, Seth Terkper, has cast doubts over the government’s ability to meet potential revenue deficits following some tax cuts.
He argues that government will also be compelled to resort to cutting down on some critical expenditure to make up for the shortfall.
“It appears that the Minister seems to have shifted the debate to the middle because he is the one who is going to face reality… how do you finance free SHS, how do you finance the one million US dollars for the constituencies?” Seth Terkper quizzed.
He added, “We are told that some monies will be taken from the District Assemblies; the very ones that are going to be losing their revenue base. So they are very hard choices and it’s up to the Minister of Finance in consultation with the President and cabinet to show reality.”
Finance Minister, Ken Ofori Atta during the budget presentation on Thursday, announced that about eight taxes that will be abolished whilst four others will be reviewed.
The taxes to be abolished include the 1 percent special import levy, and the 17.5% VAT on financial services and domestic air tickets.
The move has been met with excitement from the beneficiary sectors. But Seth Terkper told Citi Business News government may suffer severe challenges considering some risks that confront the economy.
Some of the factors that the former finance minister alluded to include; falling crude oil prices, low revenue mobilization, among others.
“We are in the race with Kenya and others by African standards, and the NPP government can up its game. But some of these are regional so it means that the economy even if it doesn’t make 7%, it’s going to double around 6% from the 3% margin it is currently. With luck, the coming on-board of the TEN Fields, and the possibility of fixing the FPSO Kwame Nkrumah and commencement by Sankofa towards the end of the year should rake in forex and exports will shoot up.”
Other taxes that are up to be abolished are; 17.5% VAT/NHIL on selected imported medicines that are not produced locally, 17.5% VAT/NHIL on domestic airline tickets, 5% VAT on real estate cost, and Duty on imported spare parts.