Professor John Gatsi, a lecturer at the University of Cape Coast School of Business, has bemoaned the impact some yet-to be introduced three new revenue bills will have on businesses, indicating that businesses as it stands now are dying.
According to him, government’s decision to promulgate laws regarding fiscal measures in the country to meet IMF requirements will largely have a negative impact on businesses. He indicated that government has already introduced enough taxes as somewhere last year, it increased VAT and reversed the benchmark value for imported goods, all in a bid to raise revenues.
These, among others, Prof Gatsi explained were geared towards meeting IMF preconditions to engage, which was done January this year. He however elaborated that this move has the possibility of pushing prices of all goods and services in the country.
“All that we want is that IMF says we need to get more revenue so, we have introduced VAT, we have removed benchmark value and it’s not sufficient, we want to bring more. So, that is the reason why these things are happening and we’re not analyzing the effect of that on businesses.
“Businesses are dying, the SMEs are becoming indebted to the banks over and over again because they cannot just pay 40% interest rate and with all these taxes around it, it is just not a good environment we are creating. So, I think passing these laws will deepen the burden and the problem the business environment is going through.”
Prof John Gatsi
Citing the 5% growth and stabilization levy, Prof Gatsi stated that he doesn’t find government’s reason for introducing new taxes to “satisfy IMF” comfortable. He highlighted that that’s not how government is supposed to introduce taxes.
Prof Gatsi highlighted that taxes are introduced to balance the need to raise revenue and the need to provide an environment for the businesses to thrive, of which government has altogether forgotten.
“We have done debt exchange programme domestically and today, the Bank of Ghana is saying that domestic debt exchange programme has affected a number of banks and to the extent that he is calling for recapitalization. So, if you have done that, the environment you have created is hostile for businesses.”
Prof John Gatsi
Addressing government’s fiscal challenges
Elaborating on the alternatives government can initiate instead of tax imposition, the UCC lecturer stated that government must ensure expenditure alignment and carry out “productive expenditure”. With this, he emphasized the need for government to engage in productive expenditure and move away from a lot of “unproductive expenditure and inefficient expenditure” in order to align taxes with expenditure.
“The alternative has been clear from day one. The alternative is that even if you increase taxes by 100% and expenditure is not aligned with the revenue, you will still be in need of more money…
“We are not even ready, even in this time we still want to keep Agenda 111 on the budget, we still want to keep all the things we are doing on the budget, that is not how it is done. In this time, our budget is not a reflection of our situation. It is something way above what we claim we are suffering. So, that is the surest alternative.”
Prof John Gatsi
Expressing his view on how soon Ghana can secure a deal from IMF despite government’s March deadline, he indicated that the insistence on an IMF programme at the end of March was “deliberate” so that if government does not get it, there’s some kind of “moral pressure” on the Ghanaian society that it’s government’s inability to pass the bills which has led to the delay in getting an IMF deal.
Nonetheless, he stated that he expects the deal to happen either by the close of April or May this year, given that parliament is able to pass the bill, which he does not encourage them since to government has passed so many fiscal bills already that is creating an uneasy environment for businesses.
“I consider it to be deliberate because there is every sign clear to the President and the finance minister that we can’t get an IMF deal by the close of March. From all indications, given that all the international creditors have agreed to support Ghana, they will then have a meeting in April. When that meeting is held in April, then it is from April or May that a deal may be clinched..”
Prof John Gatsi
