Revenue generated from taxes and grants in the country yielded GH¢16.71 billion in the first quarter of this year.
The amount accrued for the quarter is against a target of GH¢19.34 billion, a shortfall of GH¢2.63 billion which represents 13.6 per cent, according to a provisional fiscal data released by the Ministry of Finance (MoF) this month.

An assessment of the data further revealed that while revenue targets were missed for all the tax components, that for GETFund and COVID-19 Health levies which generated GH¢609. 98 million and GH¢284.70 million respectively were an exception.

Following the development, the government and its revenue collecting agencies have the arduous task to double efforts in the next nine months to be able to reach the GH¢100.52 billion target set for the year.

Some experts have attributed the revenue shortfalls in the first quarter of the year to delays in implementation of some new tax measures such as the electronic transaction levy (E-Levy), reversal of the reductions in the benchmark values (import discount) and revised Property Rate.

Bumpy road ahead

The Tax Specialist at Oxfam in Ghana, Dr Alex Ampaabeng, in an interview with the Graphic Business in Accra on May 29, said the data showed that there was a bumpy road ahead and the government needed to do more to balance the books.

He said while it was tempting to shift blame to the delay in the passage of the E-levy, this was not entirely correct because apart from COVID-19 Heath Levy and GETFund, none of the tax handles met its target.

Dr Ampaabeng who is the head of tax policy for Oxfam in the country, said aside from corporate taxes that achieved 94 per cent of its target, other direct taxes were off target, with taxes on oil achieving only 27 per cent.

“These are some of the issues that lead us to constantly advocate widening the tax to include property taxes and other more sustainable domestic revenue mobilization (DRM) options such as involving those in the informal sector, especially artisans.”

“We have a sector that is contributing about 70 per cent of all economic activities, but their tax contribution is wobbling around just two per cent.”

“This is not sustainable. Surely, the biggest sector in terms of economic activities should contribute more in taxes. We cannot have 30 per cent carrying the burden of the entire population,” he said.

Expenditure cut

The Tax Specialist noted that expenditure for the period reduced by about 12 per cent.

He said the cuts were mainly around social contributions (65 per cent below target), employee compensations (16 per cent below target) and use of goods and services (which was reduced by 91 per cent).

Again, he said a substantial cut was also recorded on capital expenditure (29 per cent off target) with the external financed component exceeding target (138 per cent), while the domestic financed component was reduced to only three per cent.

Decline in revenue

The tax expert explained that the decline in revenue further put the government in a tight fiscal space. It gives the government no room to manoeuvre this time around.

However, he said the recovery from the COVID-19 pandemic would be much faster if the government was able to meet revenue targets to steer the country towards the path of continuous recovery.

“Again, not being able to meet revenue targets will mean the country could be subjected to acute economic austerity – Thus, the government may undertake expenditure cuts in order to stay on track of governance.”

“While we support prudent economic management and expenditure cuts, we also have to be cautious to ensure that decline in revenue targets do not affect critical areas such as education, health, agriculture or on social protection,” he said.

Target not achievable

On the revenue target, he said the target for the year remained very high and unachievable.

“The target was and still remains ambitious and although I expect a high revenue compared to last year as the economy looks to be recovering gradually, we are not at the point where we can expect such a substantial increase as a country.

“I really doubt the government will meet the over GH¢100 billion target.”

“For example, the recent fuel price increase and the proposed utility tariffs are going to increase the cost of doing business on average to over 30 per cent,” he added.