Government’s projected average revenue of 16.8 percent of GDP, reflecting GHS87.5 billion which it intends generating over 2021-2024 proves difficult achieving without revamping revenue collection and roping in hard-to-tax sectors of the economy.
This year alone, the government has targeted raising total revenue of GHS 72.4 billion, reflecting 16.7 percent of GDP. And hopes to maintain that to as high as GHS103.8 billion in 2024. Yet, compared with pre-pandemic levels, the government’s total revenue from 2016-2019 averaged 15.4 percent of GDP.
Essentially, this indicates a 1.3 percentage point rise in revenue as a share of GDP. Albeit, the last four years, before the pandemic, were considered ‘good years’ for the economy. Considering that macroeconomic indicators were relatively stable, the growth of the economy was ranked among the highest in the world.
This year, the government has increased taxes and imposed new ones as presented in the 2021 budget. Revenues may increase on a year-on-year basis, but may trend below target. It is rather going to be a difficult task for the government if it continues to depend on the less than 30 percent of those who fall within the tax bracket.
Besides, the economy is still at the reboot stage and most businesses and households continue to record low revenues and low incomes respectively. Thus, other avenues need to be explored in order to reach the targets anticipated.
COVID-19 Impact and Taxes
Last year many businesses hit rock-bottom as incomes of households were either slashed or entirely lost. Massive lay-offs were the order of the day, as businesses could not cope meeting their operating costs.
The Ghana Revenue Authority (GRA) revised its revenue target to GHS53.7 billion in 2020 from the target of GHS67 billion. Following this, it later revised the revenue target to GHS42.7 billion due to the pandemic, and collected GHS45.3 billion.
Celebrating this feat, the Acting Commissioner-General of the GRA, Mr. Amishaddai Owusu-Amoah, indicated that the provisional revenue target for 2021 is GHS60 billion, representing 32.3 percent increase over the 2020 actual revenue collection.
As part of measures to collect this revenue, the Acting Commissioner-General listed the introduction of newly improved excise stamps. As well as the use of a unique identification number on the Ghana Card as Tax Identification Number (TIN) to capture non-tax public, among others.
With an additional GHS12.4billion that the government seeks to raise to foot its expenditures and other outstanding debt obligations, does this look daunting for the GRA?
Over the years, the GRA always fall short of collecting taxes as targeted due to impediments that plague collection.
These notwithstanding, the impact of the Covid-19 pandemic on businesses and households still remains. Experts indicate that the effects of the pandemic will still continue long into the future. Also, most anticipate that the economy could only get better in the next two to three years, all else equal.
Breakdown of proposed taxes
The government hopes to raise as high as GHS70.9 billion of the total tax revenue this year from domestic sources. Out of which, about 74 percent covers non-oil tax revenue amounting to GHS53.6 billion. This revenue target represents 12.4 percent of GDP.
Other taxes proposed include a COVID-19 health levy which will add 1 percentage point increase in the NHIS levy. Also, a 1 percentage point increase in the VAT flat rate towards COVID-19 expenditures is to feature.
Additionally, the government is proposing a Sanitation and Pollution levy of 10 pesewas on the price per litre of petrol or diesel. And a 20 pesewas per litre on petrol or diesel captured as Energy Sector Recovery Levy. Both of which are under the Energy Sector Levies Act (ESLA).
The government, again proposes a financial sector clean-up levy of 5% charged on the profit-before-tax of banks. The government hopes to collect this levy for the next four years after which it will be reviewed.
Also, the government seeks to tap revenues from the gaming industry from which the government estimates losing GHS300 million due to leakages.
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