The government’s decision to hike the VAT rate by 2.5 percent from the current 12.5 to 15 percent is likely to lead to most businesses folding up and also increase the unemployment rate in the country.
Most of the stakeholders that Economy Times spoke to in reaction to the 2023 budget Statement and Economic Policy said the government could have used the 2023 fiscal year to restore some macroeconomic stability and thereafter increase the VAT rate adding that with this 2.5 percent increase in VAT, it would affect businesses.
The government introduced the additional 2.5 percent VAT as part of its revenue measures after it has slashed the charges on the E-levy from 1.5 percent to 1 percent and also suspending the daily minimum threshold of GHC100.
This 2.5 percent increase in VAT would kill businesses and if it happens so, the government would not rake in the expected revenue, as it happened during the introduction of the E-levy this year, they said.
The government has set the following macroeconomic targets for the 2023 fiscal year: overall Real GDP growth of 2.8 percent; Non-Oil Real GDP growth of 3.0 percent; End-December inflation rate of 18.9 percent, Primary Balance on Commitment basis of 0.7% of GDP; and Gross International Reserves to cover not less than 3.3 months of imports.
Total Revenue and Grants represents a shortfall of 2.8 per cent from January to September, 2022 compared to the period’s target and year-on-year growth of 33.2 per cent. The shortfall in revenue stemmed from the less robust performance recorded in all the revenue handles for the period.
For the first nine months of 2022, total revenue and grants amounted to GH¢65,399 million (11.0 per cent of GDP), compared with a target of GH¢67,307 (11.4 per cent of GDP) and the GH¢49,108 million (10.7 per cent of GDP) recorded in the corresponding period in 2021.
