Dr. John Kwakye
THE
INSTITUTE of Economic Affairs (IEA) is not happy that government did not
introduce taxes in its 2020 budget presented to Parliament recently.
According
to Dr John Kwakye, director of research at IEA, government should have
considered raising some taxes, especially in the banking sector. He stressed
that “you need to mobilize more resources to support national
development.”
Dr
Kwakye, who was speaking Tuesday, in Accra, at a press conference organised by
IEA, said the 2020 Budget also lacked policies that would bring about fundamental
changes that were needed to propel Ghana’s development over the medium term.
He
said the Finance Minister was cautious with the 2020 budget because he endeavored
to walk a tight rope between stabilization and growth.
Comparing
government’s total revenue and grants of GH¢67.1 billion for 2020 which
represented 16. 9℅ of GDP to the 2019 figure of GH¢54.6 billion (15.8℅ of GDP),
he said “the revenue, capital expenditure and growth targets are not
sufficiently ambitious.”
He
continued that the Finance Minister tweaked figures to stay within the FRA
(Fiscal Responsibility Act)” adding that the approach adopted, as always,
appeared to be defined by political sensitivities.
He
said such sensitivities seemed to dictate caution, which might not, however,
lead to optimal socioeconomic outcomes that required more ambition to achieve.
Impact On Economic Growth
He
also said the budget focused more on economic stabilization or consolidation
rather than revenue mobilization and expenditure which he said had serious
impact on economic growth.
He
added that over the last three years capital expenditure has been depressed,
reason for the bad roads and schools.
“Our
reading of the budget shows that the allocation for infrastructure will still
not be enough,” he lamented.
According
to him, if care was not taken the economy could fall in the sub-optimal
equilibrium level.
He
bemoaned that over the last few years, government had been trying to
consolidate the economy due to the 2016 overrun.
Tepid Revenue Effort
Commenting
on the fiscal deficit for 2019 which has been maintained at 4.7℅ for 2020, Dr
Kwakye said over the medium term, the deficit would fall to 3.0℅, which was the
ECOWAS convergence ceiling, by 2023.
However,
the IEA said “the revenue effort is rather tepid.”
On
the domestic revenue to GDP of 16.5℅ which averaged 15.9℅ for 2021-2023, he
said figures for middle-income countries stood about 30℅ and 25℅ respectively.
The
Finance Minister revealed that government was supporting the Ghana Revenue
Authority (GRA) reforms agenda which was largely targeted at tax
administration.
On
such reforms, which Dr. Kwakye said did not reflect in significantly better
revenue outcomes, he noted: “The
Minister could have taken bolder steps to mobilize revenue, including through a
reduction of the spate of exemption as well as effective assessment and
collection of property taxes.”
He
added that expenditure was equally constrained by revenue limitations.
BY Melvin Tarlue
