THE INSTITUTE of Economic Affairs (IEA) has registered its displeasure at the tax approach adopted by the Finance Minister to make up for government’s shortfall in revenue for the second half of the year.
A senior economist with the IEA, Dr John Kwakye, who addressed a press conference in Accra yesterday, said: “To us, the minister’s approach was misplaced because the tax increases will only worsen the burden of taxpaying households.”
According to him, such undesirable incidence could have been avoided if the minister had been more innovative in his attempt to raise revenue.
Dr Kwakye noted that the minister should have addressed the nagging issue of tax exemptions whose bill, sadly, has been languishing before Parliament.
“Also, we are expecting firm action to deal with the several revenue leakages, including trade mis-invoicing, transfer pricing, other illicit financial flows, fraud and corruption. Further, ongoing initiatives to formalise the economy to widen the tax net needed to be reinforced,” he added.
Businesses spared
The IEA said the super profit-making banking, mining and telecommunications companies should have been the target of the tax increases and not consumers.
“It is clear, however, that our best efforts to raise revenue will still not yield enough to fund our large expenditure needs. Serious consideration should, therefore, be given to exploiting our vast natural resource wealth in a measured, transparent, efficient and corruption-free manner to build an advanced economy that will benefit current and future generations,” he stressed.
Expenditure
The IEA was also unhappy that expenditure had been totally safeguarded under the budget while revenue had been struggling.
“When you do not collect enough revenue, you should be prepared to reduce expenditure; otherwise you end up with a higher deficit and higher borrowing to finance it, which are undesirable outcomes.
“Expenditure has been buoyed by an expanding public sector and several new policy initiatives compounded by crippling energy sector debt payments. It is time to re-examine some of government’s policy initiatives such as Free SHS policy to determine how cost could be reduced.”
It also added specifically that there was room to reduce recurrent expenditure, including remuneration, travel expenses, entertainment expenses, general administrative expenses, etc. and thereby create for more productive capital expenditure,” he said.
Energy sector debt
On the energy sector challenges, the IEA called on government to expand power coverage in order to boost demand and revenues.
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