Ahead of 2023 economic policy Nov 24: Budget to restore stability - VAT likely to go up
The Minister of Finance, Ken Ofori-Atta, is expected to present the 2023 Budget Statement and Economic Policy of the Government to Parliament tomorrow, the Majority Chief Whip, Frank Annoh-Dompreh, told Parliament last Friday and urged members of the House to be present.
The budget, from our sources, is expected to inspire hope, restore macroeconomic stability, bolster resilience, achieve inclusive growth and ensure value addition to the country’s raw materials in order to rake in more revenue and foreign exchange to contain the current economic challenges.
Our sources have also hinted of an upward adjustment in the Value Added Tax (VAT), currently at 12.5 per cent, to between 14 and 15 per cent.
The presentation will be done in accordance with Article 179(1) of the Constitution.
“The President shall cause to be prepared and laid before Parliament at least one month before the end of the financial year estimates of the revenue and expenditure of the Government of Ghana for the following financial year,” the Constitution provides.
Given the challenges the economy is facing, which have largely affected revenue performance, the budget is expected to spell out far-reaching policy measures to restore stability and create buffers that will bolster resilience.
Expand tax net
Five persons familiar with the budget process have told the Daily Graphic that the budget would largely expand the tax net and implement tax efficient measures to increase revenue mobilisation.
The country’s domestic revenue collection is equivalent to about 12 per cent of the value of goods and services produced in the economy, measured by Gross Domestic Product (GDP).
The budget, likely to be backed by an International Monetary Fund (IMF) programme, will, therefore, outline revenue measures that will push the revenue-GDP ratio to between 15 and 16 per cent.
Value Added Tax
Multiple sources told the Daily Graphic the Value Added Tax (VAT), which is currently 12.5 per cent, was likely to be increased by between two and three percentage points.
Although the sources said the Electronic Transfer Levy (E-Levy) would be touched, they did not say whether the rate would go up or down.
The Institute of Economic Affairs (IEA), at its pre-budget forum last Monday, called on the government to reduce the E-Levy rate to 0.5 per cent to avoid evasion, indicate a plan to deal with expenditure rigidities and imbalances and address excessive public sector compensation.
The sources further told the Daily Graphic that the budget was also to spell out plans and programmes to restore stability in the economy.
The measures would include a conservative outlook to spend only on the productive sector and continued focus on expenditure prioritisation to cut waste.
They said the budget would also support businesses to create and keep jobs, while supporting start-ups, especially those led by the youth, to grow and expand, thereby containing the unemployment menace and bolstering resilience of the economy.
The budget and economic policy of the government, going into 2023, is also expected to achieve inclusive growth.
Daily Graphic sources indicate that the free SHS policy will not be affected, just like many of the government’s social intervention programmes.
However, the government will continue to promote value addition to raw materials, such as cocoa and gold, with the establishment of a refinery through a private sector joint venture, and the increase in non-traditional exports.
Debate on budget
Last Friday, Mr Annoh-Dompreh told Parliament that the debate on the budget was scheduled to commence on Tuesday, November 29, this year.
“The Business Committee looks forward to a lively, well-researched and informed debate on the economic policy of the government for the year 2023,” he said.
Sectors of economy
The Majority Chief Whip said the committee had proposed that the debate for each day be structured along specific sectors, such as security and public safety, finance and the economy generally, energy and other infrastructural sectors, the social sector, local governance, as well as youth, sports, tourism and culture.
“The recommendation is to ensure coherence, comprehensiveness and logical flow of the debate,” he said.