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Business news for Monday, March 15, 2021
Source: Goldstreet Business
03/15/2021
Osei Kyei-Mensah-Bonsu, Minister of Parliamentary Affairs
In an effort to achieve much-needed fiscal consolidation while also providing an equally necessary stimulus to the economy, President Nana Akufo-Addo’s administration has presented national budget proposals for 2021 that comprise a curious combination of refunds of newly introduced taxes and levies.
While the new levies have upset several stakeholder groups who question the timing of their introduction, the government’s strategy appears to be to use them to cover a fiscal deficit that needs to be reduced while establishing the institutional and procedural frameworks that will allow them to be replaced with revenue from an expanded tax network leveraging the Ghana card and tax identification number architecture as well as digital addressing to tax the informal sector and property.
As a whole, the government points to total income and donations for 2021 of GH ¢ 72,452 million, equivalent to 16.7 percent of the Gross Domestic Product (GDP), compared to a result of GH ¢ 55,132 million, equivalent to 14.3 percent of the registered GDP in 2020.
National Income is estimated at GH ¢ 70,987 million in 2021 and represents an annual growth of 31.7 percent over the result registered for 2020.
The Minister of Parliamentary Affairs, Osei Kyei-Mensah-Bonsu, who presented the 2021 Budget Statement to Parliament, said that the total Internal Revenue and Non-Oil Taxes would constitute about 74 percent, for an amount of GH ¢ 53,632 million .
This equates to 12.4 percent of GDP, reflecting the impact of expected improvements in tax compliance and revenue management reforms.
Wages and salaries are projected to reach 25,799 million GHc and constitute 22.7 percent of total spending, including arrears settlement, by 2021. This equates to 5.9 percent of GDP for 2012, compared to 6.6 percent registered in 2020.
The use of goods and services is projected at 5,967 million GHc or 1.4 percent of GDP, representing 5.2 percent of total planned spending. Interest payments are projected at GHc35,864 million, equivalent to 8.3 percent of GDP in 2021 and of this, internal interest payments will represent 79.1 percent, for an amount of GHc28,368 million.
Transfers to legal funds, as well as all other allocated funds, are estimated at GHc18,081 million, or 4.2 percent of GDP, representing a growth of 52.2 percent over the record result. by 2020.
Capital spending is projected at 11,423 million GHc, or 2.6 percent of GDP in 2021, a 5.5 percent decrease from the 2020 result. Of this amount, domestically financed capital spending It is estimated at GHc3.310 million and capital expenditure with external financing will amount to GHc8.112 million, financed through a combination of loans and grants for projects.
The 2020 Budget theme is: “Consolidation, Completion and Continuation”, subtitled “W0N YA WO HI33” Budget, that is, “we are moving forward”.
Mr. Kyei-Mensah-Bonsu has tried to explain the fiscal tightrope that the government is walking this year by saying that while the government acknowledges that as a result of the impact of COVID-19, times were difficult for many people, nevertheless, It was important for the government to rebuild and strengthen public finances to provide the resources needed to protect lives and livelihoods, provide critical government services, support the transformation of the economy, and ensure fiscal and debt sustainability.
Ghana’s economy is projected to grow around 5% in 2021, while inflation is expected to return to its target band of 8% plus or minus 2 percentage points.
The fiscal deficit is estimated at 9.5% in 2021, compared to 11.7% the previous year.
“The 2021 budget outlines the president’s program for accelerated recovery from the devastating impact of the COVID-19 pandemic,” Bonsu said.
“It explains our plans to emerge stronger by driving economic transformation, strengthening our social compact and building a sustainable future.
However, he cautioned that the country was not out of the woods yet and that it would need to control spending while increasing its tax base to raise more revenue.
The government also aims to achieve a gross international reserve equivalent to four months of import coverage.
The government will introduce a Covid-19 Health Levy of 1% on VAT, Fixed Rate Plan (VFRS), and 1% on National Health Insurance Levy (NHIL) as part of revenue measures to help the economy recover.
Osei Kyei Mensa Bonsu said the levies will be used for the procurement of vaccines and the establishment of 14 medical waste treatment facilities.
The Parliamentary Affairs minister said the rate “will also help in the construction of 33 large health projects, the hiring of more health professionals and the 111 agenda.”
He said that the Covid-19 pandemic has caused additional healthcare spending that far exceeds the annual budget for healthcare.
“To provide the resources necessary to address these challenges and fund these activities, the government is proposing the introduction of a Covid-19 Health Levy with a one percentage point increase in the National Health Insurance Levy and a one percentage point increase in the fixed rate of VAT. to support expenses related to Covid-19, “he said.
The 2021 budget describes the actions the government is implementing to address this pandemic.
He highlighted the acquisition of vaccines, the first batch of 600,000 doses from the COVAX facility that has already been delivered and 17.6 million additional doses of vaccines to be delivered in June, and more throughout the year.
But the fiscal framework that will be employed to achieve its goals is sure to generate fierce controversy in the coming weeks, both in Parliament evaluating budget proposals and ultimately passing the appropriations bill needed to implement it, and among economists, public policy. analysts and stakeholders from across the country.
On the positive side, the Government has announced the suspension of the quarterly vehicle income tax during the third and fourth quarters of the year for commercial public transport operators popularly called trotros and taxis.
This, said Acting Finance Minister Osei Kyei Mensah Bonsu, is aimed at reducing the cost of transportation under his tax relief program.
The Suame deputy also announced a 30 percent tax refund on income tax owed for hotel and restaurant companies, education, arts and entertainment, and travel and tours for the second, third and fourth quarters of 2021.
For small business operators using the income tax stamp system, the government suspends their quarterly income tax payments for the second, third and fourth quarters of 2021. There is also an extension of the interest exemptions on the tax arrears accumulated as an allowance to pay off early, although to be eligible, the first quarter tax obligations must have been met.
In 2021, the Ghana Revenue Authority (GRA) will intensify audits and institute measures to recover all outstanding debts and enforce collections in the extractive industry.
The acting Finance Minister said a downstream oil sector study indicated that the challenge of underreporting and tax evasion by some industry players still existed.
The Minister said that the GRA together with the relevant agencies will mount a campaign to confront the illegal acts.
On gaming policy, he said that games had become a major source of income throughout the world and an important source of revenue for the government.
Kyei-Mensah-Bonsu said the influx of online gambling and the automation of the once entirely manual process had changed the character of the industry’s revenue streams.
“It is estimated that Ghana loses more than GH ¢ 300 million annually in revenue due to leakage in the sector,” he said.
The minister said the finance and interior ministries would jointly oversee the gaming industry and would soon consult with stakeholders to formulate a comprehensive policy to improve the mobilization of revenue from that source.
