The efforts by government to make Ghana’s entry ports more competitive by slashing benchmark import values by as much as 50 percent in April and accompanying this with major cuts in port charges appears to be back-firing as import volumes have failed to pick up resulting in huge revenue shortfalls. For the first half of 2019, international trade tax revenues (all of which derive from imports since no duties are charged on exports) amounted to just GHc2,770.313 million, some 20.6 percent less than the GHc3,487.974 million targeted. Instructively government is not expecting the trend to reverse substantially during the second half of the year and has consequently revised its target for the full year downwards by GHc1,061.905 million, from GHc7,417.793 million initially expected to GHc6,355.888 million, a reduction of 14.3 percent.
Indeed, the Ghana Community Network (GC Net) recently confirmed that measured by weight, import volumes actually reduced by 42 percent over the period from the start of this year to early July, when compared with the corresponding period of 2018. This has been accompanied by a similarly substantial fall in value by 8.2 percent for the first half of this year, compared with the corresponding period of last year, with oil import value falling by 12.6 percent from US$1,309.1 million to US$1,143.6 million and non-oil imports declining by 7.1 percent from US$5,290.9 million to US$4,915.0 million.
In April this year, government effected a 50 percent reduction in the benchmark values on various imports – the value used determine how much import duty should be paid on an import for any given level of duty – although that for vehicles was reduced by 30 percent. The idea behind this move is to divert imports to Ghana’s ports from those of neighbouring countries to stem the gradual loss of market share that Ghana has been suffering for several years. Government expected to increase its revenues from import duties through increased import volumes which would more than compensate for lower duty revenues per unit of imports. However, this has not happened.
The substantial shortfall in international trade tax revenues is the main culprit behind a 9.5 percent overall tax revenue shortfall for the first half of 2019. Shortfalls, albeit of a smaller degree were also suffered with regards to income taxes and consumption taxes of virtually every category. Non-tax revenues also fell short of target while tax refunds were higher than projected and grants were less than half of projections. The cumulative effect of all this was that total revenues for the first half of 2019 amounted to GHc22,777.236 million, well short of the budgetary target for the first six months of 2019, of GHc 26,956.096 million.
The increases in both the communications tax and the energy levy announced on Monday by Finance Minister Ken Ofori–Atta are parts of government’s rear guard effort to make up for these shortfalls without sacrificing key public expenditure plans. The communications tax revenue – which was about GHc4 million short of target for the first half of 2019 – is now expected to exceed the original budgetary target for the whole year by GHc100.740 million contributing GHc524.451 million to the public purse in 2019. Similarly, the energy levy, which also fell almost GHc26 million short of target for the first half of 2019, is now expected to contribute about GHc100 million more than originally expected.
Another key factor in determining whether government will meet its revised revenue projections is the issue of tax refunds. During the first half of 2019, tax refunds were given to the tune of GHc1,413.074 million, well above the GHc1,196.268 million projected. However government is now looking to turn the situation around, keeping total tax refunds for the whole year down to GHc2,030.794 million, rather than the GHc2,572.487 million originally targeted, thus generating savings of GHc541.692 million.
