Professor of Economics at the University of Ghana, Professor Peter Quartey, has said that government’s GH¢72.4billion revenue target for the year is not over-ambitious if the Ghana Revenue Authority (GRA) employs automation to reduce the human interface in the collection process.
Commenting on the 2021 budget in an interview with the B&FT, the professor – who is also Director of the Institute of Social, Statistics and Economic Research at the University of Ghana, said the main problem that has contributed to persistent revenue shortfalls in the country is lack of automation in the tax collection system; hence, an innovative approach in the collection process is needed to address the challenge.
“I don’t think the revenue target is over-ambitious. We have not been very efficient in our tax collection. There is so much human interface in the collection process, and that is why we have not been able to raise enough revenue as we should. One advantage COVID brought us was an increase in online activities. So, if GRA should do more of automation and tax online businesses, I am sure that the target can even be exceeded.
“We should task the GRA to automate their systems to minimise their leakages as much as possible. They should be more proactive and more innovative in our tax collection. If we are really collecting the taxes that people should pay, we will exceed that target,” he said.
Government has declared it is hoping to raise some GH¢72.4billion in revenue for this year after achieving the revised target for last year despite reduced economic activity stemming from impacts of the coronavirus pandemic on the economy.
The 2021 target of GH¢72.4billion also signals government’s confidence of a rebound in economic activity, especially when it exceeded the revised target of GH¢53.7billion in 2020 from the original target of GH¢67billion following the pandemic’s impact on the economy.
Out of the 2021 target amount, about GH¢70.9billion is expected to be raised from domestic sources. Of this, non-oil tax revenue will constitute about 74 percent – which will amount to GH¢53.6billion, equivalent to 12.4 percent of GDP. This essentially means government aims to heavily rely on taxes as the main revenue generation strategy to address persistent shortfalls it has faced over the last four years. Hence, the budget statement has introduced new taxes and made an upward revision for some existing ones.
Among the taxes government has introduced to achieve this target is a new tax dubbed ‘COVID-19 Health Levy’, which will see a one percentage point increase in the National Health Insurance Levy and a one percentage point increase in the VAT Flat Rate to support expenditures related to COVID-19.
In addition to this, government said it is proposing a Sanitation and Pollution Levy (SPL) of 10 pesewas on the price per litre of petrol/diesel under the Energy Sector Levies Act (ESLA); and a further Energy Sector Recovery Levy of 20 pesewas per litre on petrol/diesel under the ESLA as a means of finding additional resources to cover the excess capacity charges which have resulted from the Power Purchase Agreements (PPAs).
The implementation of these two proposed levies for sanitation and pollution as well as to pay for excess capacity charges, according to the budget statement, will result in a 5.7 percent increase for petroleum prices at the pump. What this essentially means is that prices of goods and services are likely to go up, as effects of the increment will affect transport fares – which will directly be passed on to consumers.
Besides these taxes, government has further slapped a financial sector clean-up levy of 5 percent on profit-before-tax of banks to help defray outstanding commitments stemming from the financial sector clean-up. The levy, the budget states, will be reviewed in 2024.
That is not all: the budget statement further added that there will be a review of existing road tolls, which will be aligned with current market rates as part of the framework for promoting burden-sharing as the country seeks to transform the road and infrastructure sector in a COVID era.
Another area that government seeks to tap into for revenue is the gaming industry, as it is estimated that the economy loses over GH¢300million annually in revenue due to leakages in the sector. The gaming industry is fast-gaining ground in the country with the influx of online betting and automation