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Ofori-Atta Slashes E-Levy From 1.5% To 1%; VAT Increment To Finance Road Construction

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Finance Minister Ken Ofori-Atta presenting the 2023 Budget Statement in Parliament

The Electronic Transfer Levy, which introduction last year sparked a row in Parliament, has now been reduced from the current 1.5% to 1%. However, the threshold of GHS100 has been scrapped.

This means all E-levy transactions will now attract a flat rate of 1%. No reason was given for the reduction, but government appears to have listened to the cry of the people that it should be reduced.

“The government intends to review the Electronic Transfer Levy (E-Levy) Act.
More specifically, the government will reduce the headline rate from 1.5% to one percent (1%) of the transaction value.

Further, the 100 Ghana cedis daily threshold has been removed”, the minister for Finance, Ken Ofori-Atta, announced in Parliament yesterday, whilst presenting the 2023 budget.

Mr Ofori-Atta also told the Members of Parliament (MPs) that the government intends to increase the Value Added Tax (VAT) by 2.5% and that this will generate an income of GHS2.70 billion, which will be used to augment funding for our road infrastructure development.

Giving reasons for the increment, the minister explained that the demand for roads has become the cry of many communities in the country. Unfortunately, with the current economic difficulties and the absence of dedicated source of funding for road construction, it is difficult to meet these demands.

“In that regard, the government is proposing the implementation of new revenue measures.

The major one is the increase in the VAT rate by 2.5 percentage points. This will be complemented by a major compliance programme to ensure that we derive the maximum yields from existing revenue handles.”

OTHER INITIATIVES

The Minister also announced that government will fast-track the implementation of the Unified Property Rate Platform programme in 2023.

Under this programme, the Ghana Revenue Authority (GRA), in collaboration with other Land Valuation Board and other stake holders will value all landed properties in the various Metropolitan, Municipal and District Assemblies.

The revenue that will be generated will be paid into a central pool and distributed to the assemblies, based on a formula agreed by the parties.

The Ministries of Local government and Finance, which are spearheading the policy, recently told Editors in Accra that payment for the property rate will be made onto an electronic platform and that the assembly where the property is situated will automatically be credited immediately the payment is made.

The Land Valuation Board, which does the valuation and the GRA, which has created the platform, will all have shares in the revenue.

Minister Ofori-Atta, who had a smooth budget presentation, contrary to earlier reports that the MPs will boycott him, also said in a bid to boost local productive capacity, the government will among others cut the imports of public sector institutions by 50%. The cut is for public institutions that rely on imports, either for inputs or consumption.

The government will also support large-scale agriculture and agribusinesses interventions through the Development Bank Ghana and ADB Bank.

To promote exports, the government will among others, expand productive capacity in the real sector of the economy and actively encourage the consumption of locally produced rice, poultry, vegetable oil and fruit juices, ceramic tiles.

RESOURCE ALLOCATION 2023
Total Expenditure, including clearance of Arrears for the 2023 fiscal year is projected at GH¢205,431 million, which is 25.6% of the Gross Domestic Product (GDP).

The minister explained that this estimate shows a contraction of 0.3 percentage points of GDP in primary expenditures (commitment basis), compared to the projected outturn in 2022.
Compensation of employees is projected at GH¢44,990 million (5.6% of GDP) and use of goods and services is also projected at GH¢8,048 million (1.0% of GDP).

Interest payment for 2023 is projected at GH¢52,550 million (6.6% of GDP) and grants to other government units is estimated at GH¢30,079 million (3.8% of GDP).
Meanwhile, Capital Expenditure (CAPEX) is projected at GH¢27,694 million (3.5% of GDP), other expenditure, mainly comprising Energy Sector Levies (ESL) transfers and Energy Sector Payment Shortfalls is estimated at GH¢26,739 million.
IMF ENGAGEMENT
The Minister also revealed to the MPs that negotiations with the International Monetary Fund (IMF) are going on smoothly.

According to him, the Fund assured Government of its strong commitment and support in these difficult times.
He said programme objectives have been agreed on, between the government and the IMF.
He added that a preliminary fiscal adjustment path, debt strategy and financing required for the programme to be in line with the government’s Post-COVID-19 Programme for Economic Growth (PC-PEG) has also been agreed on.
The PC-PEG is government’s blueprint to restore macroeconomic stability, promote debt sustainability, sustain economic recovery and support structural reforms.

The government has also ceased the use of V8 and V6 by public officials unless for a cross-country.
Further, there will not be any printing of diaries, calendars and other souvenirs for 2024.
However, Parliament is yet to approve the appropriation bill that will allow for any expenditure in the coming year.

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