Tax policy takes centerstage in Parliamentary debate over 2019 budget

The country’s future may not be as bright as government has projected if some tax policies which were adopted by government in the last two years, are not totally scrapped the opposition in Parliament has claimed as the debate in the legislature over the 2019 budget proposals began yesterday.

Indeed, tax policy will likely be the main battleground between legislators on each side of the political divide, judging by arguments presented on the opening day of deliberations that are expected to last between one and two weeks.

Notable taxes including the AU levy, National Fiscal Stabilization levy, Special Import Levy, Luxury Vehicle Tax, have all being met with some opposition from Ghanaians and opposition parliamentarians have been quick to leverage on these, even including those taxes introduced while their party was in power.

The conversion of GETfund and NHIL into Direct Sales Tax which can no longer be recovered from VAT have both culminated into higher prices of goods and are providing ammunition for what promises to be heated, and perhaps acrimonious parliamentary deliberations over the next fortnight.

For instance, a member of the Finance Committee of Parliament, Hon. Benjamin Kpodo suggested yesterday that such taxes be totally scrapped to offer the citizens some respite in the face of the current economic challenges.

He also recommended that the earmarked fund capping law which limits budgetary allocations to statutory funds to 25%, in order to give government more spending flexibility should be reversed so that institutions using those funds can have the full amounts they need to execute their mandates.

Speaking to the Goldstreet Business on the 2019 national budget proposals, Mr. Kpodo explained that government has been compelled to rely on the country’s insufficient revenue to cater for the very high expenditure estimates brought about by social interventions such as teacher trainee allowances, the school feeding programme, free Senior High School, Nations Builders Corps (NABCO), as well as economic growth and development initiatives such as one district, one factory and Planting for Food and Jobs leaving a huge funding gap.

He said the Ghc72.7 billion budgets for expenditure against projected revenue of GHc58.9 billion has a challenge in terms of credibility of the estimate.

Instructively, Ghana’s budget has consistently been falling short of revenue estimates for the past two years and that has led to cuts in expenditure, particularly spending on development projects such as economic and social infrastructure.

Opposition legislators are also questioning the revenue projections of almost GHc59 billion being forecasted for next year, while last year’s budgeted revenues which were forecasted at GHc39 billion, have  falling well short by up to 9.5%.

Government has therefore been compelled to reduce its total expenditure by GHc2.2billion below plan, which most importantly has affected capital expenditure to the tune of GHc913.6million as part of a total 14.3% public spending cut.

When the forecast is not credible and targets are not met, specific sectors tend to suffer the consequences, Mr. Kpodo explained, adding, “the earmarked fund capping law, which limits all earmarked fund to 25% has been creating major challenges.”

Government, beyond that has also realigned the leftovers of the earmarked funds to the special flagship projects which it is pursuing.

That has evidently left some established institutions which are to execute these projects under the earmarked funds, short of available funding, and parliament is set to host a debate over this too.

For instance, point out opposition legislators, over the last two years, GETfund has been capped and realigned at GHc1.6 billion, which constitutes 2.5% of VAT receipts.

But Mr. Kpodo asserts that this is the reason why GETfund is serious short on funding and as such they cannot pay contractors working on school blocks across the country.

“This was the reason why government came to Parliament to seek approval to issue a bond for US$1.5 billion against future receipts of GETfund resources to be able to pay the contractors. This could have been avoided if government had not capped and realigned GETfund monies” he insisted.

Mr. Kpodo said GETfund carries out a lot of educational infrastructure and there is no need to cap its resources.

“That law must be amended to exclude GETfund, road fund and the district assembly common fund. Infrastructural projects by GETfund can be executed by the trust fund without borrowing to replace monies meant for the earmarked funds.

Opposition members of Parliament appear set to demand that the earmarked fund capping law be reversed so that institutions using those funds can have the full amounts needed to execute their mandates.

By Wisdom Jonny-Nuekpe