"2023 Budget \u2013 It\u2019s a \u2018Pro Austerity\u2019, but let\u2019s get it right"

" 2023 Budget \u2013 It\u2019s a \u2018Pro Austerity\u2019, but let\u2019s get it right \r\n\r\nFinance Minister goes to Parliament to present what is arguably the most important budget in our recent history today.\r\n\r\nThe economy is tumbling, Investor confidence is low, banks are reluctant to give credit, inflation is skyrocketing and the Cedi has all but lost its core function \u2013 as a \u2018better\u2019 store of value.\r\n\r\n My Expectations: \r\n\r\nThere\u2019s no doubt this is going to be an \u2018austerity\u2019 budget as the IMF wants to see a clear path to debt sustainability before granting any facility. In our bid to get the economy on track with the IMF support, this budget should be heavy on \u2018Expenditure cuts\u2019. It is difficult to weigh in on this or bet for heavy austerity measures considering this is a government that\u2019s so \u2018Pro Social interventions\u2019. But, we need to face the realities and rather opt for what will revive us and pump new blood and fresh air into our system \u2013 We need it!\r\n\r\n So, this is what I think;\u00a0 \r\n\r\nSome government flagship programs may [should] be suspended, cancelled or face cuts. Here we need costs benefits analysis and projects like PFJ, 1V1D, 1C1W, etc.. could be suspended at least for now. PFJ should be the lifeline at these hard times, but I doubt it has achieved anything close to this tag.\r\n\r\nTime to be bold and go for \u2018means testing\u2019 for the free senior high. Government spends over GHC2.4bn on FSHS, but we equally know some parents can support. We should introduce a means testing mechanism to target only the \u2018very poor\u2019 to free fiscal space. Surely, it is a good initiative that has to be maintained, but this will depend on Ghanaians \u2018owning\u2019 it and paying towards its upkeep. Government alone cannot do it. FACT!\r\n\r\nIt\u2019s a no-brainer that Nursing and Teacher trainee allowances should be scrapped. These are tertiary students and they should be moved onto the students\u2019 loan scheme so they receive enough and timely support for their education whilst freeing an important fiscal space needed for the bailout.\r\n\r\nGovernment needs to make some sacrifices. The 30% cut in appointees\u2019 salaries is welcoming but surely, the fiscal gap is far bigger to be filled with this alone. It\u2019s time to merge some government agencies and ministries. It\u2019s hard, but we need to face the reality that \u2018Ghana is broke\u2019. Government could go further and look at cutting the staffing levels too. Could a single deputy be enough at places where we have two or three? Time to do a proper system audit, look at job demands and take critical (but unpopular) decisions.\r\n\r\nThe budget should be heavy on austerities but it shouldn\u2019t come at the expense of social protections. I do not expect cuts in education or healthcare, so let\u2019s keep things as they are, at least for now.\r\n\r\nOn revenue, we need to demonstrate that we are a country working to take our own destiny and not to be dictated to by the \u2018Bretton Woods\u2019. Aside expenditure cuts, revenue mobilization is crucial and will determine (to a large extend) what we get from the IMF, when, and how we even get out to restore the needed macros stabilities.\r\n\r\nI personally DO NOT expect any new taxes. However, I expect the government to introduce serious measures to rope in needed revenue from the existing tax handles.\r\n\r\nTime to get serious on property taxes. There\u2019s no seriousness on implementing the right reforms for administering property taxation. This, for now, represents the biggest opportunity for revenue generation in the country.\r\n\r\nI would be happy to see an additional tax band of say 35% or 40% on higher incomes. This will be a progressive measure if well designed at these trying times. People will oppose it, but in hard times, we don\u2019t tax the poor more (as being done), but an additional tax band on higher incomes will be a better way to burden share. I am for it!\r\n\r\nThe government must increase the tax-free amount. Currently it\u2019s GHC365 a month. This was introduced in a period when inflation was wobbling around 8%. With inflation well over 60%, in ideal world (all thing being equal) I expect this figure to be over a GHC1000, however, being realistic, I think they may put it around GHC450 \u2013 GHC500 range. This will not be enough at this hard time, but I think this is how far the government can go.\r\n\r\nI want E-levy cancelled, but I also do think we need revenue and things are very tight, so whilst my heart is strictly against it for its unwarranted economic distortions, I see a reduction to 1%. Some analysts are calling for 0.25%. I do not know the basis for this figure, but I don\u2019t see the government bringing it that low. So, we may see a figure anywhere between 0.5% and 1%.\r\n\r\nDigital service tax must be introduced. Kenya has introduced this and are enjoying with about 142 companies captured and a revenue of almost $5m raised since beginning of the year. Ghana should do same, as luckily for us, we are not part of the OECD inclusive framework. We have the license to go solo on taxing the digital economy. Time to go hard on the tech giants too and the digital market players. It should be \u2018operation leave no penny behind\u2019 on taxes this time round.\r\n\r\nI can see road toll smiling and finding its way back to greet already \u2018angry\u2019 Ghanaians. Although I will rather prefer a \u2018Road Tax System\u2019 where every car pays and not the ones that crosses the toll booth. I think the economic tensions will not allow the managers to go on exploratory missions on taxation, so we leave it here and wait for Ken to speak!\r\n\r\n \r\n\r\n \r\n\r\n Alex Ampaabeng, Ph.D. \r\n Tax and Fiscal Policy Analyst "

"2023 Budget \u2013 It\u2019s a \u2018Pro Austerity\u2019, but let\u2019s get it right"

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