Nduom attacks budget

…unhappy with tax increment

By Daniel Nonor

Dr. Paa Kwesi Nduom, CPP

Dr. Paa Kwasi Nduom, the 2008 Convention People’s Party (CPP) presidential candidate, has expressed unreserved surprise at the government’s decision to increase taxes, when it had indicated that it was pursuing a growth agenda.

The government, in its budget statement presented on the floor of Parliament yesterday, announced that over the medium term, its fiscal policy would be guided by the objective of scaling back the fiscal deficit to 7.5 to 3.0 per cent in 2013, which it hopes to do by improving its tax collection mechanism among other reforms.

“To achieve these fiscal targets, the government will intensify the ongoing reforms in public financial management, improve tax collection, review the import duty exemptions regime, rationalise recurrent expenditures, contain expenditure through public sector pay reform, and address the threat of high debt burden,” the Minister of Finance noted.

But, Dr. Nduom is of the opinion that countries that have stimulated their economic growth did so by broadening their tax base and reducing taxes, and thus he found it rather ironical that the government of Ghana had chosen to increase taxes instead.

He emphasised that by reducing taxes, it affords employers the chance to expand their businesses and employ more, thereby propelling the needed growth.

Nduom further argued that if the government’s growth agenda was largely dependent on the services sector, as it has touted over the past few months, then it has shot itself in the foot by increasing taxes in key areas of that sector.

His comments were on the premise of the government’s announcement of the repeal of tax exemptions for the hotel and hospitality industry among other tax increases, as stated in the budget yesterday.

“In our continuing effort to make policy evaluation and oversight effective, and to improve the institutional coordination in the way we administer exemptions, it has become necessary to recommend to the House to repeal LI 1817, which empowers the Ghana Investment Promotion Council (GIPC) to grant tax exemptions for the hotel and hospitality industry. We will take stock of the relevant incentives, bring them in line, and incorporate those that are desirable into Act 592, to be managed by the Ghana Revenue Authority, as was previously the case under the defunct Ghana Investment Centre,” the Minister of Finance, Dr. Kwabena Duffuor, noted in the budget statement.

Nduom further noted that countries that propelled growth of their economies, made conscious efforts at assisting indigenous businesses, as Britain did with its banks, and the United States with General Motors.

Oil revenue

While revenues from oil and gas are expected to provide some fiscal space for the acceleration of economic growth, its contribution was disappointingly below public expectation, as revenue from oil, for the first 3 to 4 years, is expected to be considerably lower than the non-oil tax and non-tax revenues.

For the fiscal year 2011, the expected revenue from oil sales will represent only 6 per cent of total domestic revenue.

Total revenue from oil into the budget is estimated at GH¢584.0 million, equivalent to 1.9 per cent of GDP.
“We all, therefore, need to help manage public expectation,” the Finance Minister cautioned.

scaling back the fiscal deficit to 7.5 to 3.0 per cent in 2013, which it hopes to do by improving its tax collection mechanism among other reforms.

“To achieve these fiscal targets, the government will intensify the ongoing reforms in public financial management, improve tax collection, review the import duty exemptions regime, rationalise recurrent expenditures, contain expenditure through public sector pay reform, and address the threat of high debt burden,” the Minister of Finance noted.

But, Dr. Nduom is of the opinion that countries that have stimulated their economic growth did so by broadening their tax base and reducing taxes, and thus he found it rather ironical that the government of Ghana had chosen to increase taxes instead.

He emphasised that by reducing taxes, it affords employers the chance to expand their businesses and employ more, thereby propelling the needed growth.

Nduom further argued that if the government’s growth agenda was largely dependent on the services sector, as it has touted over the past few months, then it has shot itself in the foot by increasing taxes in key areas of that sector.

His comments were on the premise of the government’s announcement of the repeal of tax exemptions for the hotel and hospitality industry among other tax increases, as stated in the budget yesterday.

“In our continuing effort to make policy evaluation and oversight effective, and to improve the institutional coordination in the way we administer exemptions, it has become necessary to recommend to the House to repeal LI 1817, which empowers the Ghana Investment Promotion Council (GIPC) to grant tax exemptions for the hotel and hospitality industry. We will take stock of the relevant incentives, bring them in line, and incorporate those that are desirable into Act 592, to be managed by the Ghana Revenue Authority, as was previously the case under the defunct Ghana Investment Centre,” the Minister of Finance, Dr. Kwabena Duffuor, noted in the budget statement.

Nduom further noted that countries that propelled growth of their economies, made conscious efforts at assisting indigenous businesses, as Britain did with its banks, and the United States with General Motors.

Oil revenue

While revenues from oil and gas are expected to provide some fiscal space for the acceleration of economic growth, its contribution was disappointingly below public expectation, as revenue from oil, for the first 3 to 4 years, is expected to be considerably lower than the non-oil tax and non-tax revenues.

For the fiscal year 2011, the expected revenue from oil sales will represent only 6 per cent of total domestic revenue.

Total revenue from oil into the budget is estimated at GH¢584.0 million, equivalent to 1.9 per cent of GDP.

“We all, therefore, need to help manage public expectation,” the Finance Minister cautioned.

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