As part of efforts to increase the share of government revenue derived from non-tax revenue, the Institute for Fiscal Studies (IFS) recommends that government revises a number of user fees and charges levied by public agencies.
These, the Institute indicates have declined in terms of their real values, due to little or no adjustment for extended periods.
The Institute made this call during a press briefing ahead of government’s 2019 mid-year review, in Accra on Monday.
For the past two fiscal years, 2017 and 2018, actual government revenue expressed as a ratio of the original budget target fell short at an average of 80 percent.
In the first quarter of 2019, non-tax revenue amounted to GHc 1,362.49 million, representing 0.4 percent of GDP, significantly below the projected target of GHc 2,026.17 million. This represented a shortfall of 32.5 percent.
Taxes on domestic goods and services made up of VAT, Excise duty, National Health Insurance Levy (NHIL), GETFund Levy and Communication Service tax amounted to GHc 4,161.03 million, representing 1.2 percent of GDP, which was broadly consistent with the budget target of the first quarter of 2019.
However, the institute indicates that government needs to further strengthen the administration and mobilisation of non-direct taxes, as a way to improve revenue performance, by the end of year.
“Revenue gains stand also to be derived by following through rapidly with the envisaged reform of the tax exemptions regime, in respect of which the government submitted a bill to Parliament in early 2019,” the institute noted.
Over the last two years, though the weak-performing areas of tax revenue have been the same areas that experienced most of the tax cuts enacted by government in 2017.
In view of this the institute noted that this suggests that the tax cuts have contributed to the government’s failure to realise its revenue expectations, as their adverse short-term impact on revenue mobilisation was underestimated.
The tax cut was implanted in several classes of tax, including; the Income Tax (Amendment)Bill,2017, Special Petroleum Tax (Amendment) Bill, 2017, Special Import Levy (Amendment) Bill, 2017 and Customs and Excise (Petroleum Taxes and Petroleum Related Levies) (Repeal) Bill, 2017.