The Chamber of Petroleum Consumers Ghana, COPEC, says government would have to be more serious about broadening the tax net especially by capturing the informal sector if it hopes to make up for the revenue shortfalls created by fallen crude oil prices.
According to COPEC, the COVID-19 pandemic has presented an opportunity for government to include the informal sector in tax issues as the sector also has a lot of potential in contributing immensely to revenue generation.
In an interview with Citi Business News, Executive Director for COPEC, Duncan Amoah, said the presentation of the Mid-Year Budget Review on Thursday July 23, should provide an opportunity for the Finance Minister, Ken Ofori-Atta, to come up with a policy direction stating alternative measures to collect revenue and ease the burden on the petroleum sector.
“We will need to widen our tax net. For a long time, we have had to concentrate on the petroleum revenues over the period. Every time it is on petroleum. If it is not taxes, then we are probably making projections of 58 dollars. Currently, the 2020 budget has pegged a barrel of oil at about 62 dollars. It is clearly not going to be realized and so there will be revenue shortfalls. We will need to expand the tax net so that a lot of those in informal sector pay their taxes.”
“Even our commercial transport operators, if we are able to bring in about 80% of them, the direct vehicle income tax, government will at least be able to make up for the revenue loss locally from the persons who do business within the system, but are unable to contribute because they fall within the informal sector. So, we need to expand the revenue and tax net in order that we can make up for the losses,” he said.
The outbreak of the novel coronavirus has led to a limited demand for crude globally.
As a result, prices fell from almost 60 dollars to nearly 20 dollars a barrel, thereby affecting global economic growth and creating excess oil supply. Currently however, it has risen to 28 dollars per barrel.
Coronavirus downs oil revenue by 82% in first quarter
In the wake of the pandemic, data from the Bank of Ghana data showed that about 18 percent of oil revenue target was realized in the first quarter of this year.
According to the Fiscal Development Report (May 2020), out of the GH¢1.9 billion projected to be reaped from the oil sector, only GH¢331 million was realized, indicating more than 82 percent shortfall from the target.
Meanwhile, in the 2020 budget, revenue from crude oil was projected with a price of US$62.6 per barrel, hence, the shortfall in revenue.
Also, Finance Minister Ken Ofori-Atta has stated that government estimates to lose more than GH¢5.6 billion, even if the price climbs to US$30 per barrel.
The shortfall in oil revenue also affected GDP growth for the first quarter of the year, as for the first time in memorable years after the commercial production of oil, both oil and non-oil GDP growth recorded the same growth figure of 4.9 percent in a quarter.
Meanwhile, in the first quarter of 2019, oil GDP grew at 6.7 percent whereas non-oil GDP recorded 6 percent growth.