The University of Professional Studies-Accra (UPSA) has proposed to government to consider reintroducing the luxury vehicle tax as way of widening the tax base.

In addition, UPSA wants efforts at collecting property tax to be intensified by leveraging on the national digital property addressing system.

The Research Consultancy Centre (RCC) of UPSA, instituted by the Universities Economic Dialogue Series, a platform to contribute meaningfully to Ghana’s economic policy and discourse, made these and other recommendations during UPSA’s analysis of the 2021 budget statement.

The analysis covered three thematic areas; namely, revenue, expenditure, and debt and suggestions on how to improve revenue generation; reduce debt and ensure prudent spending, and the way forward as Ghanaians.

The Research Consultancy Centre of UPSA urged government to find creative ways of taxing soaring small and medium-sized online businesses to improve revenue generation.

It proposed digitisation drive as a way of tracking revenues and tax collections in both the formal and informal sectors, as well as in public institutions.

It stated that efforts at reducing corruption must still be high on the government's agenda to reduce leakages in the revenue basket while prioritising continual improvement in the revenue administration.

On the expenditure side, reducing ‘wastage’, investing in agriculture, industry and emerging businesses sectors to stimulate growth, and avoiding penalties and judgment debts through timely continuity/execution of contracts were suggested.
On public debt, government was urged to borrow for productive ventures, complete the project/purpose for which such loans were contracted, as well as prudent management of borrowed money were emphasised.

The analysis noted that while the 2021 budget contains enough policy directions to overcome the challenges confronting the economy, more focused effort in key areas with multiplier effects are required.

The analysts were of the view that enhancing revenue mobilisation, prudent expenditure of available public funds, management of the fiscals of the economy, including enhancing public institutions, using competent personnel, stemming up the corruption avoidance efforts, among others, are important for the sustainability of the budget.

COVID-19 pandemic has caused additional health spending that far exceeds the annual budget for health.

The Research Consultancy Centre of UPSA observed that the one percentage point increase in the National Health Insurance Levy (NHIL) and Value Added Tax (VAT) Flat Rate would impact negatively on businesses.

According to it, NHIL and VAT flat rate are not recoverable by the taxpayer as a deduction from its output VAT as was the case under the VAT credit system, and, therefore, businesses are likely to pass them on to consumers.

It cautioned that government faces opposition to the Sanitation and Pollution Levy (SPL) of 10 pesewas on the price per litre of petrol/diesel under the Energy Sector Levies Act and introduces the Energy Sector Recovery Levy (ESRL) of 20 pesewas.

The impact of the SPL and ESRL is a proposed 5.7% increase in pump prices, saying the challenge is whether government can hold on to it without succumbing to pressures from the impact these taxes would have on consumers, as well as on the prices of goods and services.


Key innovations found under revenue generation in the 2021 budget statement

a) The proposed collaboration between the Ministry of Finance and the Ministry for the Interior to co-supervise the gaming industry and formulate a comprehensive policy to improve revenue mobilisation may lead to improvement in revenue. While we admonish further expansion of the tax base to increase tax revenue, focus should not be on increasing oil and gas receipts to avoid the ‘Dutch disease’.

b) Government’s pledge to review existing road tolls and align them with current market rates will improve efficiency.

c) The rebate of 30 per cent on income tax due companies, in hotels and restaurants, education, arts and entertainment, and travel and tours for the second, third and fourth quarters of 2021 will create temporary room for expansion (must be monitored to inform future policy).

d) The suspension of quarterly income tax instalment payments for the second, third and fourth quarters of 2021 for small businesses will bring temporary relief to small businesses.

e) The suspension of quarterly instalment payments of the vehicle income tax for the second, third and fourth quarters of 2021 for ‘trotros’ and taxis may cushion vehicle owners temporarily against the 5.7 per cent increase in petroleum prices.

f) The extension of the waiver of interest as incentive for early payment of accumulated tax arrears may incentivise payment of tax arrears. This must be monitored to inform future policy.

g) The proposal to establish a Development Bank of Ghana is in the right direction.