Finance Minister-designate, Ken Ofori-Atta, has said that government was very deliberate in the introduction and adjustment of taxes in the 2021 budget, because its aim to move the economy from taxation to production is still a prominent policy feature.
Many have criticised government for making a U-turn on its exalted policy after the budget statement presented by Minister of Parliamentary Affairs, Osei Kyei Mensah Bonsu, on Friday introduced new taxes such as the COVID-19 Health Levy and increments in the VAT Flat Rate and NHIS Levy.
The budget also proposed a Sanitation and Pollution Levy (SPL) of 10 pesewas on the price per litre of petrol/diesel under the Energy Sector Levies Act (ESLA); and a further Energy Sector Recovery Levy of 20 pesewas per litre on petrol/diesel under the ESLA as a means of finding additional resources to cover the excess capacity charges that have resulted from the Power Purchase Agreements (PPAs).
But Mr. Ofori-Aatta explained that all the measures introduced in the budget are to ensure the state is able to create financial freedom by fixing some anticipated fiscal challenges so enough liquidity will be available for entrepreneurs and businesses to tap from.
Speaking at a post-budget forum organised by PricewaterhouseCoopers (PwC), the Finance Ministerdesignate said: “Globally, countries are looking at preserving lives and livelihoods, and stimulating their economies for growth amid this pandemic; and I think we are not doing any less. The president’s budget focuses on Ghana CARES Obaatanpa programme and how we will bring Ghana from the devastating effects of COVID-19 and build back better and greener.
“It also provides a revenue mobilisation strategy, cocoa revenue and compliance measures which will enable us to carry out the critical interventions that we will have to do for our economic recovery.
“We started in 2017 with grave difficulties as we all know; but, however, the issue of how do you create a society that has production as opposed to taxation so that the state is not cohesive is still on. We want to have a society in which social mobility reflects in all that we do, and economic freedom is an important aspect of it. As a result, we are fixing some financial structural issues so that we can have the resources for entrepreneurs etc.”
Background
In 2017, government either abolished or reduced over 15 ‘nuisance’ taxes. These included abolishing the 17.5% VAT/NHIL on real estate; abolishing the 17.5% VAT/NHIL on selected imported medicines that are not produced locally; abolishing the 17.5% VAT/NHIL on financial services; and abolishing import duty on the importation of spare-parts.
Government also abolished the 1 percent special import levy; 17.5 percent VAT on domestic airline tickets; levies imposed on Kayayei by local authorities; reduced import duty for goods excluding vehicles by 50 percent and for vehicles by 30 percent; and abolished excise duty on petroleum.
Government also provided a full corporate tax deduction for private universities which ploughed back 100 percent of profits into the university; reduced the Electrification Scheme Levy from 5 percent to 3 percent; reduced the Public Lighting Levy from 5 percent to 2 percent; reduced special petroleum tax rate from 17.5 percent to 13 percent, and introduced specific rates.
But with the recent move in the 2021 budget, some Ghanaians are apprehensive and fear more taxes may come to replace the abolished ones.
