Ghanaian businesses are calling on the government to scrap or review some of the taxes they say are hurting their performance and growth. The taxes include the e-levy, the COVID-19 levy, the petroleum levy and the growth and sustainability levy.
These taxes were introduced or increased by the government as part of its fiscal consolidation measures to access a US$3 billion bailout from the International Monetary Fund (IMF) in May 2022. The IMF programme aims to restore macroeconomic stability and debt sustainability in Ghana, which has been hit hard by the global economic downturn and supply chain disruptions.
However, the businesses argue that the taxes are too high and discourage consumption, investment and innovation. They say that lowering the tax rates or abolishing some taxes may initially reduce tax revenue but will eventually boost economic activity and tax collection.
The businesses also suggest that the government should widen the tax base, rationalise its expenditure and review some flagship programmes, such as the free senior high school education, to create fiscal space and reduce the debt burden.
These views were expressed by 133 businesses from various sectors of the economy in a pre-budget survey conducted by KPMG, an auditing and accounting firm, in collaboration with the United Nations Development Programme (UNDP).
The survey results were released ahead of the 2024 budget presentation, which is scheduled for November 15. The budget is expected to outline the government’s policies and priorities for the next fiscal year, as well as the progress and challenges of the IMF programme.
According to the survey, the businesses identified currency depreciation, high inflation, high-interest rates and the tax environment as the main factors that negatively affected their performance in 2023. They also faced challenges such as access to credit, retention of skilled labour, power supply and supply chain disruptions.
The businesses recommended that the 2024 budget should focus on policies that promote inclusive green growth by strengthening local businesses and supporting exports through industrialisation, mechanisation of agriculture and infrastructure development.
Anthony Sarpong, the Senior Partner of KPMG Ghana, said the survey findings highlighted the need for the government to balance its fiscal objectives with the needs and expectations of the private sector, which is the engine of growth and job creation.
“We hope the insights from the survey will help the government in their deliberations and provide valuable contributions in the lead-up to the 2024 budget,” he said.
Evans Asare, a Partner at KPMG, said the businesses should be confident that the economy will soon bounce back, as some signs of recovery and stability have emerged in the last few months. He cited the decline in inflation from a 22-year high of 54.1 per cent in December 2022 to a 12-month low of 38.1 per cent in September 2023, the improvement in the gross international reserves from US$1.5 billion (0.6 month of import cover) in December 2022 to US$2.1 billion (1.0 month of import cover) in September 2023, and the stabilisation of the cedi against the US dollar.
He also said the expected release of the second tranche of US$600 million from the IMF later this month will help the country to navigate the Christmas pressure on the cedi and support the local currency and businesses.
“Businesses can have that certainty and predictability that the cedi will experience relative stability and won’t depreciate beyond what we have seen in the last few months,” he said.
He added that the debt sustainability issues were also being addressed, and “once the external creditors come on board, this would be resolved”.
He urged the public and private sectors to continue to engage and collaborate to see how they can get the economy back on track and achieve the vision of a prosperous and resilient Ghana.
Source: Graphic Online
