The Institute of Fiscal Studies (IFS) has expressed fears over the government’s ability to meet its revenue projection for next year [2019].
The think tank argues that the government will have to work to attract a lot more people to pay taxes if it is to meet the set targets.
The concerns raised by the Institute for Fiscal Studies in its post budget media briefing are premised on the increase in total revenue and grants for 2019.
For next year, the government seeks to raise a total of 58.9 billion cedis in revenue.
This translates into 12.1 billion cedis more than projected in 2018.
Again, the economic think tank has described the targets as over-optimistic which could escalate even with the exit from the IMF program.
A Research Fellow at the IFS, Leslie Mensah said, ‘It is important to point out that fiscal expansion has been a common characteristic of the country’s fiscal policy whenever the country leaves an IMF program, which has normally led to high fiscal deficits and macroeconomic instability. The IFS therefore cautions government that it has to be careful not to derail the fiscal gains made in the past two years, since the consequences could be unpalatable. In this regard, the IFS recommends that in 2019 the government should continue to pursue the expenditure policy it pursued in 2017 and 2018, i.e. aligning expenditures with actual revenue collections, so as to avoid fiscal overruns.’
He also highlighted the need for the government to control its expenditure by prudently managing revenue to the benefit of Ghanaians and promote national development.
‘The Institute further suggested that public sector reforms that had been long delayed should be carried out as a matter of priority. The reforms should include right-sizing of the sector to reduce what is obviously an over-bloated pay roll, plagued by, among others, large numbers of ghost names and other irregularities. The Institute also called for reexamination of some of Government’s policy initiatives, especially the consumption-based ones, such as nursing trainee allowances, teacher trainee allowances and some components of the FSHS policy, with the aim of streamlining them so as to reduce costs while exploring other non-Government funding options.’
The Finance Minister, Ken Ofori Atta in an earlier interview attributed the apparent low impact on revenue to the delay in implementing major tax reform policies.
“We have not been able to accomplish all of that in terms of the takeoff for the VAT decoupling. There was also some expectations of the electronic point of sale systems that have not yet gone into operations. My feeling is that there is a lot of learning that one has gone through this 22 months,” he said.
Meanwhile the IFS has lauded some interventions by the government to tackle the persistent drop in revenue.
“IFS is also pleased to note the Minister’s expressed displeasure with the growing incidence and magnitude of tax exemptions, which the Institute has continually drawn attention to. As the Minister acknowledged, the exemptions are subject to gross abuse and irregularities. The decision to draft a policy to be passed into law to regularize the exemptions is, therefore, a step in the right direction and should be fast-tracked.”
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By: Pius Amihere Eduku/citibusinessnews.com/Ghana