PricewaterhouseCoopers Ghana LTD (PwC) has stated that it expects government to achieve its revised revenue target of GH₵96.8 billion for the 2022 fiscal year as a result of rising oil prices and exports.
In the 2022 Budget Statement, Government committed to fast-paced fiscal consolidation and sustainable growth through the implementation of revenue mobilization initiatives. Government also set out to moderate the rate of debt accumulation as Ghana navigates its recovery from the COVID-19 pandemic.
In its analysis of the 2022 mid-year budget, PwC stated that the mid-year budget review reaffirmed these commitments, although the challenges that were faced in the first half of 2022, particularly with respect to revenue mobilization, have necessitated a revision of various targets in order to moderate the planned pace of growth and fiscal consolidation.
“The previous revenue and grants target of GH₵100.5 billion for 2022 has been revised to GH₵96.8 billion, a 3.7% reduction. This still translates into a growth target of 37% relative to the 2021 performance (GH₵70.9 billion). The revised target is expected to be achieved mainly as a result of the windfall in revenue from oil production and exports, a result of increased global oil prices.
“This will help to significantly offset shortfalls from other revenue sources, particularly tax revenues. While the benefit of increased global oil prices has helped to support the Budget in the short term, the fundamental and perennial challenge around revenue mobilization, and the need to significantly improve our tax to GDP ratio persists and still needs to be confronted”.
PwC
Additional revenue measures
This, in the view of PwC, continues to be the driver for the additional revenue measures set out, which Government has indicated it will pursue in the second half of 2022.
These measures include: introduction of the Electronic Invoicing System (e-VAT) towards enhancing revenue assurance and mobilization; upfront payment of VAT by importers not registered with VAT; and implementation of the common platform for property rate collection and accountability.
Others include: extension of Penalty and Interest Waiver to December 2022 for tax debts accrued to the 2020 calendar year and the amendment of the tax laws on e-commerce, betting and gaming to align them to current trends.
PwC further urged the government to review the implementation of the 1.5% electronic transactions levy (E-Levy) especially the rate, following the revision of the revenue target of the levy in the mid-year budget.
“The downward revision of the e-levy revenue target by over 91% (from GH₵6.9 billion to GH₵0.6 billion) indicates the need for a review of the policy and its implementation. We wish to remind Government of our call for the e-levy rate to not exceed the rates typically charged by resident platform operators of not more than 0.75%”.
PwC
Much anticipated Mid-Year Budget Review
On 25 July 2022, the Minister for Finance, Mr. Ken Ofori Atta, presented the much anticipated Mid-Year Fiscal Policy Review of the Budget Statement and Economic Policy of the Government of Ghana for 2022 (“the Budget”) to Parliament.
The heightened interest in this particular mid-year review was in the context of Ghana’s difficult post-pandemic recovery and the recent announcement by the Government of Ghana of its decision to commence engagement with the International Monetary Fund (IMF) to support Ghana’s economic recovery program.
This announcement, according to PwC, signaled to the business community that all was not well with the implementation of the measures set out in the 2022 Budget as presented by the Minister on November 17, 2021, and that the attainment of the key macroeconomic targets that were set as part of the Budget were perhaps at risk.
Indeed, the trend of various economic indicators that were publicly available before the mid-year review, e.g., the rate of inflation, interest rates and the level of public debt, all suggested that Ghana’s economy was in some difficulty.
The anticipation was therefore, that the mid-year review would lay bare the current state of the economy and set out Government’s plans to stabilize and put the economy back on the path of sustainable growth. Given that Government’s engagement with the IMF has only just commenced, it is perhaps too early to expect a detailed plan for the recovery of the economy in the medium term, PwC noted.
It is therefore, not surprising that the mid-year review does not provide such a plan. However, PwC indicated that the review made it clear that any eventual agreement with the IMF will be based on an Enhanced Domestic Program that will complement the previously announced Ghana COVID-19 Alleviation and Revitalization of Enterprises Support (CARES) “Obaatan Pa” program.
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