The Government of Ghana is once again on the verge of missing its revenue targets for 2021, despite its strong resolve to rely on its own resources to fund its expenditures.
The consistency with which government misses its macroeconomic targets raise concerns with data suggesting that successive governments might have been overly ambitious in setting targets for fiscal years, especially revenue targets.
In the first nine months of 2021, government missed its revenue targets by GH¢4,079 million, culminating to 7.9 percent of the target for the period. Total Revenue and Grants for the first three quarters of 2021 amounted to GH¢47,235 million, against the revised target of GH¢51,314 million.
Even though the End-September outturn was an improvement over the GH¢37,445 million total revenues and grants collected in the same period in 2020, it still raises concerns because the circumstances in 2020 were far different from that of 2021. Economic activity has picked up significantly as of Q3 2021 which is expected to have translated into a much higher revenue collection.
Revenue collection in the first 9 months of the year was stymied by the poor showing of two broad revenue components: grants and Domestic Revenues. Grants fell short of the period target by 29.0 percent, while Domestic Revenue underperformed by about 7.4 percent. A decline in grants should not be of much concern for Ghana, especially as the country seeks to push the ‘Ghana Beyond Aid’ agenda.
Major Concerns
The consistency with which government misses its domestic revenue targets should be of grave concern to all Ghanaians. Between January and September, Ghana expected to collect GH¢50,121 million as revenues within the domestic economy. However, it was able to raise GH¢46,388 million, a shortfall of GH¢3,733 million.
At the beginning of the year, the government introduced some taxes to help raise funds to complement its efforts to fight the pandemic and minimize its impacts on households and businesses. But, the performance of the Non-Oil Tax Revenue as a whole seemed to suggest that these taxes have not been efficient as government is yet to raise the amount it expected from these taxes.
Government was able to raise GH¢ 249.7 million against a target of GH¢358.1 million between May and June 2021 from the new taxes, some of which include: Pollution and Health Levy, Delta Fund Levy, COVID-19 Health Levy and financial sector clean-up levy.
Initially, there were calls from the general public and experts that government should consider scraping some of these taxes as they believe, the taxes are not yielding enough revenues but only contributing to inflationary pressures. The poor performance of these taxes further supported the argument that Ghana cannot tax its way out of the current fiscal challenges.
Poor performance of Non-Oil Tax Revenue
In the first 9 months of 2021, government’s Non-Oil Tax Revenue amounted to GH¢34,889 million, GH¢ 2,967 million lower than the projected amount of GH¢37,856 million for the period. In other words, government missed its target for this tax component by 7.8 percent in the first three months of the year.
The least said about the performance of the Non-Oil Non-Tax Revenue for the review period, the better. Government could only manage GH¢4,260 million out of the target of GH¢5,199 million in three quarters of the year. A nominal deviation of GH¢939 million, means government missed the target by 18.1 percent.
The performance of total revenues as demonstrated by the poor outturn in the various components for the first three months of the year, clearly casts doubts on the government meeting its overall revenue target of GH¢70,347 million for the 2021 fiscal year.
Since government continues to miss its target, in order to limit the temptation of overspending, government should consider targets that are achievable given the current economic conditions. It should also continue its efforts to improve revenue mobilization in the country through digitization.
Rather than increasing taxes, government should focus more on improving non-tax revenues to ease pressure on businesses and households, which will in turn, limit the pressure on government to roll out further stimulus packages as the pandemic continues unabated.
READ ALSO: It is Government’s Onerous Responsibility to Buy Laptops for Teachers – Kofi Asare
