By Toma Imirhe
With barely three weeks left for Parliament to come to an agreement over appropriations for the 2022 budget which would allow government to spend money requisite to keep itself running into the impending new fiscal year, Finance Minister Ken Ofori-Atta has announced several proposed modifications relating to issues which the Parliamentary Minority is contesting, leading to fierce controversy and accompanying drama on the floor of the legislature over the past fortnight.
Indeed with Parliament scheduled to go on recess ahead if the end of year festivities on December 17 this means government effectively has just a week and a half to get its proposed appropriations approved.
However government is sticking to its guns on the biggest controversial issue of them all – the 1.75 percent e-levy, even though it acknowledges it will have a difficult time reaching a consensus. Argued the Finance Minister in a statement to the media yesterday: “Recent economic data suggests that the overall tax to GDP ratio for SSA in 2018 was 16.5%. The tax to GDP ratio for Ghana in 2019 was estimated to be 12.2%. Our tax-to-GDP ratio is lower than our peer countries in West Africa and significantly lower than many developed nations. (South Africa- 26.7%, Senegal- 16.4%, SSA average-16.5%, Ghana-12.2% in 2019). These statistics are a poor reflection on the country and highlight the need to change the narrative. We cannot continue to depend on such a low tax base to generate adequate revenue, service and reduce our debt, to build our infrastructure (roads) and to create needed jobs for our youth. The Future is therefore one of “sacrifice” from all of us and “burden” sharing as a people with one language to transform the Republic.
“Furthermore, out of about 18 million potential income taxpayers:i only 2.4 million persons (approximately 8% of the total population) are registered as personal income taxpayers as of August 2021; ii. Only 45,109 entities are registered as corporate taxpayers while 54,364 persons are registered as self-employed taxpayers at the Ghana Revenue Authority; and iii. There are about 17 million registered voters and about 19 million active mobile money accounts. 19. In using the 17 million registered voters or the 19 million mobile money accounts as a proxy for Ghanaians that are of adult age and economically active, and comparing it to the 2.4 million Ghanaians who pay income tax, we are confronted with the stark reality that the structure of our economy is quite informal, unlike the western economies, and as such, the traditional 6 tax handles, like the personal income tax, also known as PAYE, may not be as effective in raising the required revenue.
“The essence of our proposal on the E-Levy is to widen the tax net and generate the required revenue to support entrepreneurship, youth employment, build our infrastructure (especially roads) and reduce our debt. The E-Levy represents our greatest opportunity to, in the medium term, broaden the tax base and meet the Taxto GDP ratio of 20% as pertains among our peers.“
The Finance Minister computes that with the new tax initiative contained in the 2022 budget, especially the e-levy which is expected to generate GHc6.9 billion next year, Ghana’s tax to GDP ratio would rise to about 16.8 percent by year’s end.
Another issue being addressed is that of the controversial Agyapa Royalties initiative which Ofori-Atta clarified was referred to only for informational purposes and does not actually form part of the budget. Here Ofori Atta assured that “ We shall amend paragraphs 442 and 443 to take out references to mineral royalties collateralisation.
The next area of the Parliamentary Minority’s angst relates to the tidal waves crisis in Keta which recently rendered about 3,000 people homeless. Asserted the Finance Minister :”We shall make the necessary budgetary allocations of at least GHS10 million to complete the Feasibility and Engineering studies for the coastal communities adversely affected. We will broaden the scope of the study to consider a more comprehensive solution to protect Ghana’s 540 Km of coastline, including the 149 Km between Aflao and Prampram.”
This is another area that will be tricky to negotiate since government’s proposed new budgetary allocation covers feasibility studies but not actual construction. But Ofori-Atta defends this explaining that a holistic, affordable solution is required for Ghana’s entire coast line all of which could conceivably be affected in similar manner. He points out that at current construction cost estimates it would cost Ghana some US$40 billion to build a sea defence wall for the entire coastline which is clearly not affordable so alternatives have to be identified and implemented.
Relating to another controversy, regarding the Aker Energy transaction, involving a US$1,1 billion buy back of that company’s equity in some exploration blocks to accelerate oilfield development the Finance Minister assured that “we shall amend paragraph 829 of the 2022 Budget on the acquisition of a stake from Aker Energy and AGM Petroleum by GNPC, to reflect the resolution of Parliament dated 6th July, 2021 that “the terms and conditions of the loan for the acquisition of the shares shall be brought to Parliament for consideration pursuant to article 181 of the Constitution.
Regarding the other major controversy, that of the reversal of the 30-50 percent cut in benchmark import values, used to determine import duty obligations the Finance Minister assured that :” we shall avert any hardships to importers and consumers while safeguarding the interest of local manufacturing industries to secure and expand jobs for our people. This administrative exercise which reviewed 43 out of 81 line items, has the objective to promote local manufacturing and the 1D1F policy, including the assembling of vehicles. It is important to note that this adjustment affects only 11.4% of the total CIF value, of which 50% is for vehicles. From our analysis, the potential increase in retail prices should be relatively insignificant and therefore inflation should be muted. The YouStart policy will also support our accomplished Traders with appropriate training and access to capital to become 3 Manufacturers in order to expand the industrial base of our society and our import substitution strategy, in line with our Ghana Beyond Aid agenda.
Ahead of the appropriations debate all these proposed modifications have been contained in a letter to the Speaker of Parliament. Assured the Finance Minister:” We will work with the relevant Committees of Parliament to reflect these modifications in the 2022 Budget as is the usual practice, before the Appropriation Bill is passed. Any other concerns which may emerge shall be addressed during the discussions of the estimates by the Committees, as has been the tradition.”
