Gov’t likely to introduce new taxes… as businesses call for it
Ken Thompson has thereby cautions the government to introduce new taxes if only it wants to be prudent with its spending.
“We have a situation where Ghana’s income is being spent on three items. We are spending on wages and salaries, interest expense and statutory deduction. Once those three items have been paid for there is nothing left,” he said.
He observed that government is currently not investing in capital expenditure that will have the ability to pay for loans acquired to invest in such areas.
“What we are doing is funding recurrent expenditure like electricity, petrol, uniform for police. All those things are being funded with debt. That is not sustainable. We need to say cut. We need to cut and now recalibrate and asked how are we getting out of this situation,” he stressed.
Speaking at the CIMG-hosted event, Ken Thompson engaged in a hypothetical conversation with the Finance Minister, Ken Ofori-Atta where he sought to show that the cedi was overvalued using the Big Mac Index — published by The Economist to measure purchasing power parity (PPP) between two currencies.
According to the Dalex Finance CEO, the overvalued cedi made Ghanaian exports expensive and non-competitive, while imports were relatively cheap.
He notes that this development results in stunted economic development and unemployment.
Ken Thompson makes the case that the trickle-down effect of the overvalued cedi will jeopardize most, if not all government policies including the“Planting for Food and Jobs” programme.
He said, the polices are likely to be non-competitive because of the overvalued cedi.
Ken Thompson argues that the state of Ghana’s economy started experiencing challenges since 2017.
“We spent almost 100% of all our revenue including grants on three line items as follows: compensation to employees, interest payments, and, statutory payments, example GETFund, District Assemblies Common Fund, and NHIS.”
Mr Thompson also raised concerns over the rise in government expenditure which he described as worrying.
“Since we spend over 100% of our revenue on these 3 items, all our other expenditure is done from monies borrowed. We are borrowing to fund consumption and not to fund investment.
“Our debt is piling up (70% of GDP), and, we may not be in a position to repay in future. Even before then, any natural or man-made disaster could send us into a default tailspin of government obligations causing intolerable hardship, widespread business failures, and mass unemployment,” he stated.
“We can do three things. We can either increase income, we can cut expenditure or we can do both. But the situation we have now is not sustainable. What I am proposing is that one of the ways by which we can increase income is to increase taxes across board, for a short period— let’s say three years,” he suggested.
He maintained that the country is currently broke, a situation that possess economic danger to the financial stability of the country.
Mr. Thompson added that the cedi was overvalued using the Big Mac Index — published by The Economist to measure purchasing power parity (PPP) between two currencies.
He argued that the situation has made imports cheaper compared to exports, creating a situation that may stifle government’s one district one factory programme due to cheap imports.
Meanwhile, managers of the National Health Insurance Scheme (NHIS) are also proposing a percentage of tax to be imposed on alcoholic beverages in order to manage the scheme.
According to Upper East Regional Director of the Authority, Sebastian Alangpulinsa, the pro-poor policy was introduced in 2003 for resident Ghanaians to seek health care without financial constraint.
He, however, said the scheme is struggling due to financial constraints to meet its growing demand.
It is against this backdrop that the authority is proposing a tax on alcoholic beverages to enable it to settle its arrears.
The director made this known during an end -of- year performance review meeting underway at the Ghana Health Service In-service Training Center.
The managers are also proposing a tax on cigarette and sugar as well as a percentage of Ghana’s oil revenues for more funds.
Deputy Upper East Regional Minister, Frank Adongo Fuseini entreated organized labour to dialogue with workers to come out with suggestions on a proposed 1 percent from employees basic salary and 2 percent from employers to sustain the scheme.
Mr. Adongo challenged staff of the Authority to step-up their activities in registering the poor population of the region.
Some deserving district managers in the region were given awards in recognition of their performance for the past year