By Frank Amponsah
The Minister of Finance Ken Ofori-Atta yesterday rendered the opposition National Democratic Congress (NDC) minority in Parliament speechless when he informed the House in his Mid-Year Budget Review statement, that there would be no increment in VAT.
“I’ll like to inform the house Mr. Speaker that there will be no increase in VAT,” he announced
The minority NDC, ahead of the Mid-Year Budget Review presentation accused government of planning to increase not only taxes, but VAT also.
The conjecture was sparked by Mr. Gabby Asare Otchere-Darko who posted such information on social media of an increase in VAT from 17.5% to 21.5%.
The NDC took issue with the government over the speculation and vowed to fight any such tax increase.
Meanwhile, after the Mid-Year Budget Review presentation by the Finance Minister it became clear that government had found innovative ways to ensure that the tax net was widened and clearly defined.
Ken Ofori-Atta told Parliament categorically that there would not be any increase in Value Added Tax (VAT) as widely speculated.
In Parliament, Mr Ofori-Atta cautioned the NDC to “stop taking directions on economic policies from social media”.
He averred that “On the under-performance for the first five months of 2018, we will end the year with an estimated deficit of 4.9% of GDP compared to the programmed target of 4.5%, resulting in a fiscal gap of GHS870 million, unless we immediately implement some fiscal measures; intensive tax compliance measures, New revenue measures, Intensive Conversion of NHIL (2.5%) to a straight levy, Conversion of GETFund VAT rate of 2.5% to a straight levy, Imposition of luxury vehicle tax of GHS1,000 – GHS2,000 on non-commercial vehicles with capacity of 3.0 litres and above, review of PIT to include an additional band of GHS10,000 and above per month at a rate of 35% and downward adjustment discretionary expenditures.”
He revealed that, last year the Akufo-Addo government abolished numerous taxes and that the scale of tax reductions had never been implemented in the 60 years of Ghana’s economic history since independence.
He said: “The evidence shows that the economy has responded positively to these tax cuts. What is also clear to us Mr. Speaker is that we are not collecting as much as we should.”
Ken Ofori-Atta also pointed out that solution to the country economy is not necessarily imposition of many taxes.
He stated that “we must first make sure that we ensure compliance with existing tax laws, plug the leakages in the existing system, ensure value-for-money for the expenditures that government undertakes and ensure Mr Speaker, that the wealthy also pay their fair share. Me Speaker, any taxes should be to elicit socially desirable outcomes such as a better environment in this regard.”
On Inflation, the Minister said that the disinflationary trend experienced in 2017, continued during the first five (5) months of 2018 which was largely supported by stability in the foreign exchange market and generally favourable macroeconomic developments.
Headline CPI inflation, he said declined from 12.6 percent in May 2017 to 11.8 percent in December 2017 and trended further down in the first five months of 2018 to 9.8 percent in May 2018.
He said: “The continued downward trend in inflation is consistent with the central bank’s forecast and market expectations. The Bank’s latest forecast suggests that inflation will remain within the medium-term target of 8±2 percent in the last three quarters of 2018, barring unanticipated shocks.”
He also said the overarching goal of government’s macro-fiscal policy as set out in the 2018 Budget and guided by H.E. President Akufo-Addo’s Coordinated Programme of Economic and Social Development Policies (2017-2024), which is to deepen macroeconomic stability, grow the productive sectors of the economy, create jobs and ultimately move the economy ‘Beyond Aid’.
He added that the country’s fiscal policy has been designed to reduce the fiscal deficit to ensure debt sustainability without compromising growth.
“It has also been designed to be growth friendly, reformative and flexible to enable a quick adaptation to an evolving economy,” he said.
Ken Ofori-Atta also mentioned that after seven years of agitation by public sector workers demanding that their pension funds be transferred to their schemes to be managed, government transferred the total amount of GH¢3,001.73 million being the total value of funds in the Temporary Pension Fund Account (TPFA) and restored workers’ pension funds to the five (5) public sector pension schemes.
“Something that the previous regime had been unable to do for seven years,” he stressed.
Outlook for 2018 and the Medium Term
He said government will continue the course began in the 2018-2021 MTDS which is aimed at extending the maturity profile of the debt portfolio through the issuance of longer-dated instruments to reduce the rollover and refinancing risks.
In the remaining quarters of the year, the minister noted, the Credit Rating Team (CRT) of government will continue to conduct credit risk assessments on public entities in Ghana and will complete assessments for five (5) additional SOEs to ascertain their creditworthiness.
“Government will also continue ongoing work to finalise credit risk assessment guidelines to govern credit risk assessment of public entities. Guidelines for the contracting of guarantees and for entering into on-lending arrangements, as well as fee guidelines to inform the charging of guarantee fees will also be prepared and finalised over the medium term.”
He said, over the medium term, government will continue to carry out its
Mandate of managing the public debt at the lowest possible cost and subject to prudent levels of risk by conducting debt sustainability analyses and revising the medium term debt strategy to guide borrowing. Recommendations from these documents will inform policy decision on reducing the debt burden and ensuring insulation against other fiscal vulnerabilities.
Tax On Luxury Cars
Meanwhile, all luxury cars with an engine capacity of 3.0 litres and above will attract a tax of between GHS1000 and GHS2000.