Government’s decision to impose new taxes in 2021 does not seem to go down well with majority of Ghanaians. Many experts are of the view that instead of introducing new taxes, the government should rather cut down on its expenditure. Gov’t Gov’t Gov’t
The latest to add his voice to the list is the IMANI Boss, Franklin Cudjoe who believes the government could have reduced its size of government.
“After all the permutations, the government can only hope for 72bn cedis from new and old taxes for 2021. Yet, the government needs 113bn cedis to take care of its bills for 2021. Yes, some of its bills could be reduced.
“I think we can still reduce the size of government and block leakages. Petroleum fraud alone costs us 1.9bn cedis according to CBOD and Suspicious tax exemptions sometimes totaling 10bn cedis annually is another”.
Concerns about the imposition of taxes
Mr. Cudjoe indicated that it will be very disastrous if the government doesn’t secure at least 26bn cedis between now and June 2021. Meanwhile, he believes that “the government is broke”.
“I hear the pains of paying new taxes and as libertarians, IMANI is minded that taxes must be optimized based on critical needs alone. Even more, pressing for this prudence is the devastating impact of coronavirus. But the new taxes on petroleum-related goods will bring in close to 1.3bn cedis- pales into insignificance… the deficit is a staggering 40bn cedis by end of the year, and that is assuming government gets all its projected revenue of 72bn”.
He asserted that the country is now on course to pay for all the freebies enjoyed during the first wave of the coronavirus pandemic. He added that “we told you there was no free lunch…looks like time to pay back in taxes”.
Mr. Cudjoe indicated that even though we can blame coronavirus for most of our ills, what is critical is the need to get serious with everything and account properly for all taxes and investments.
Financing of projects
Also, the IMANI Boss noted that he was in agreement with Minority Leader, Haruna Iddrisu, that the country must not embark on new projects unless it has secured funding. He referred to Hon. Kyei Mensah- Bonsu’s statement that the government will ensure that 8700 projects at various stages of completion will be prioritized.
“Presumably, these projects include the crucially needed 111 hospitals and 14 waste treatment facilities. These are more important in a pandemic-impaired world than any others. But they must do with both private money (70 %) and 30% of public money. We are too broke to have the government alone fund it”.
Ricardian Equivalence
The recent announcement of the government’s intention to impose new taxes, however, does not come as surprise. This perfectly reflects the phenomenon of Recardian Equivalence in Economics. These summaries the argument advanced by the IMANI Boss, ‘there is no free lunch’.
The basic idea is that; consumers are forward looking, so if they receive a tax cut financed by government borrowing they anticipate future taxes will rise. Therefore, their lifetime income remains unchanged and so consumer spending remains unchanged.
This is what the theory is saying, but has the ordinary Ghanaian made any savings that will enable them pay these taxes without affecting their consumption patterns?
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