Accra, Ghana, November 18, 2019//-A Ghanaian economist and law reformist, Dr King Bachiesichang is emphatic that Ghana’s 2020 budget would not transform the lives of Ghanaians.
According to him, “the 2020 budget comes to suffocates Ghanaians under an already mixed weight of skyrocketing debts, declining industry growth, credit dried up as interest rates rose and banks’ bad loans are piling up, widening current account and budget deficits, among others”.
He added that depreciating currency, high cost of living and “king promises”, overspending, the uneven distribution of the national cake among the 16 administrative regions, high youth unemployment as a direct result of the collapse of nine banks and several financial institutions accounted for one of the worst growth rates to be recorded in the country.
“Public debt is rising as a result of the so-called financial sector clean-up. The indicators are penciled in black and white for everyone to see that this year’s budget presents only cracks and no hope for Ghanaians”, Dr Bachiesichang told African Eye Report.
Import duties and benchmark values
He argued that the Akufo-Addo-led government economic policy of 50% reduction of benchmark values at the country’s ports is such a bad economic policy and a huge yoke around the necks of manufacturers.
It is an undisputable fact that the introduction of such benchmark values has had a terrible and negative impact on locally manufactured products and for that matter killing industries.
“In any serious economy, government must know that a reduction in import duties would possibly lead to the markets being flooded with imported products, making locally manufactured products uncompetitive in the process.
And that is exactly the kind of budget presented by the finance minister to parliament. No doubt his policy direction is inherently defective and hampers economic growth and development, declining volume of production”.
As a direct result of such shrinking market sizes finished products would literary be coming in large volumes. When this happens the revenue mobilization arm of the Ghana Revenue Authority equally declines because the revenue that is supposed to be generated from import duties, is coming down as a result of such reduction, Dr Bachiesichang, explained.
For instance if someone imports at barely 5% there is a corresponding 50% reduction, that person only makes a gain of 2.5%. As compared to someone who imports finished products paying 20% as duty and you reduce it by 50%, the gain he makes is 10 %, thus a defective budget policy with cracks that will continue to have a crippling effect on local industries in Ghana.
Tax structure
Some experts even predict that the 2020 budget will overhaul the entire structure. In fact one of the worse things to befall any nation is a broken tax system.
For this reason tax reforms should be fixed on revenue mobilization instead of the usual cacophony of boring sloganeering announcing cuts on non-existing taxation lines like the unpopular ‘kayayie’ one, he said.
Dr Bachiesichang pointed out that local industries were folding up as a result bad economic policies of the government.
It is fundamentally wrong that people get their income from betting or playing the property market pays less tax than those who go out to work and earn an income only to be engulfed with nuisance double taxation as seen lately like the talk tax coming from telco subscribers.
He further explained that taxing such subscribers is rather taxation with no economic sense of growing or reforming the tax regime. The current tax system works only for the rich.
To this end, Dr Bachiesichang suggested to the government to rather consider fundamental reforms by merging income tax with national insurance contributions and applying a single, gradually rising tax between 2 percent and 50 percent for the highest earners.
Revenue targets have being consistently missed with Ghana Revenue Authority not meeting its target in two years row.
He questioned whether the government could meet the annual target of GH¢58.8 billion to raise domestic revenue to finance development projects in the country.
Well, most experts fear this looking at the government’s revenue mobilization strategy that is a major headache, as many pundits are equally also of the view that the review of the tax structure would enable the Finance Ministry to meet its revenue targets.
It is clear that managers of the economy are proposing complicated reforms for a solution that does not exist in this budget which is just like in literal terms barking up the wrong tree.
“Just that this government doesn’t want progressive things, they believe more in ‘rocket science’ if not the best approach to these tax reforms could be a progressive way which raises public money whilst protecting the lowest paid and avoiding high rates on marginal tax on the highest earners”, Dr Bachiesichang, recommended.
“Huge complexities in our taxation approach have to be looked at if government really means reforms. Tax code should be kept simpler for the ordinary people, not complicated.
Any system that looks complicated is a bad system. The government should also look at how these taxes are collected. Shifting of tax burden is also another harrowing issue in this country”.
So far this is the fourth budget under Akufo-Addo since he assumed office on January 7, 2017.
The consolidation of this year’s budget would stem from some of these factors: the revenue measures that were introduced in the 2019 Mid Year budget review which included the review of the Energy Sector Levies Act, 2015 (Act 899) to consolidate all the revenue legislation relating to the energy sector into one law and the planned upward adjustment in the Road Fund Levy, the Energy Debt Recovery Levy and the Price Stabilisation and Recovery Levy to bring the ratios close to 21 per cent, the upward adjustment in the Communication Service Tax to nine per cent, which took effect from October 1, this year. And fiscal excesses that comes with election years are policy decisions that must be threaded cautiously.
Dr Bachiesichang lamented: “It’s a sacred covenant that Ghana being the first to free itself from colonial rule in 1957 and a stable democracy in the 1990s after decades of political upheaval”.
With a thriving economy fueled by exports of cocoa, gold, and oil. Many citizens are still living in abject poverty.
African Eye Report
