Former Minister for Finance, Mr. Seth Terkper has averred that doubts over Government’s inability to attain the GHC 4bn revenue target from the recently passed tax revenues by tax experts in the country comes as no surprise.
Speaking with journalists on Monday, April 3, 2023, Terkper quipped that despite the introduction of numerous taxes by the incumbent government, the country’s tax revenues as a percentage of GDP remains stagnant with no significant improvement in tax revenue mobilization.
“There is a lot of evidence that shows that most of the taxes introduced have not improved revenue. Revenues as a percentage of GDP have been stagnant and haven’t risen. E-levy is an example of newly introduced tax that was meant to increase the country’s tax revenue to 19% of GDP, but failed to do so.
“If the taxes reduce demand, increases costs of production among others, it won’t bring the needed revenue. And there are also the instances of tax evasion among others. So, there is a good reason for the scepticisms expressed by tax experts and business industry leaders of Government not being able to raise the targeted GHS 4bn tax revenue.”
Mr. Seth Terkper
Ghana And Her IMF, Tax Hurdles
Parliament has approved new tax measures expected to raise an additional $340 million in revenue in a bid to meet requirements for the International Monetary Fund’s $3 billion bailout program.
In a tight vote, the country’s hung parliament passed the measure 137 to 136.
The bills, according to Parliament, will increase some income taxes and corporate taxes, as well as the excise duty on cigarettes and various alcoholic and sweetened beverages.
The taxes, as stated by Parliament, will help facilitate IMF approval for the funding after bilateral creditors give the necessary financial assurances.
Ghana is now targeting an agreement by the end of April, after the March deadline was missed.
Meanwhile, contrary to Ghana’s April deadline forecast, Fitch in its projections on 3rd April, 2023 disclosed that Ghana is expected to secure a Board approval for its $3bn IMF bailout programme by the end of the second quarter of this year – June 2023.
The assertion by Fitch Solutions follows the failure of the government to secure a board approval at the end of March 2023 as promised, despite the execution of the domestic debt exchange programme and passage of three tax revenue streams.
Making the assertion in its recent report on the Ghanaian economy, the agency noted that, the board approval of the bailout programme will among other things, unlock critical financial assistance, shore up the country’s foreign exchange reserves, improve investor confidence and aid the BoG complete its monetary policy tightening cycle.
“Our core view is that Ghana’s staff-level agreement with the IMF will receive executive board approval in Q2-23, which will unlock critical financial assistance, shore up the country’s foreign exchange reserves and improve investor confidence.”
Fitch Solutions
Fitch Solutions however warned that, failure of the government to once again achieve a board approval in June, will result in further deterioration of the country’s foreign exchange reserves and a sell off of the local currency – cedi.
“If Ghana fails to obtain critical IMF funding by the end of Q2-23, the cedi would sell off again due to weak investor sentiment and falling foreign exchange reserves. In this scenario, inflation would increase, which indicates that the BoG would tighten monetary policy beyond our current forecasts.”
Fitch Solutions
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