Debt Exchange: IBF proposes GHS 83bn revenue saving measures to Gov’t
The Ghana Individual Bondholders Forum (IBF) has proposed to government, several fiscal readjustment measures to government expenditure and revenue which it indicates, will ensure revenue savings to the tune of GHS 83.45bn.
The recommended fiscal readjustment measures to government, the IBF notes, will contain the current economic crisis and help the country achieve its debt sustainability goal, a pre-requisite for a $3bn IMF bailout.
Reiterating its position for the exclusion of individual bondholders, the Technical Committee of the IBF in its interaction with government, averred fiscal readjustments can be made in the areas of oil and gas, mining, divestiture of SOEs, property taxes, recovery of funds through financial irregularities, recovery of funds through tax evasion, rationalization of budget of SOEs, among others.
According to the IBF, it believes its fiscal readjustment recommendations are “competent enough” to urgently address the country’s fiscal challenges and enable the country reach its desired 55% debt-to-GDP ratio target as proposed by the International Monetary Fund.
Take a look at the recommended fiscal readjustments by the IBF:
- Enforce the filing of interest/coupon income on corporate instruments (ESLA, Daakye, Cocoa bills) as part of Personal Income Tax (PIT) and effect the 25% tax related to the income. Alternatively, revise the 1% withholding of the related securities to 20% and make it final and deductible at the source.
This creates an additional revenue of circa GHS104 million for the current fiscal year.
- Oil production has dropped from over 200kbpd to below 160kbpd yield revenue loss more than $300mn (GHS3.6bn) in 2022. The government should, as a matter of urgency, review the regulatory and fiscal environment to encourage existing producers to ramp up production and develop new fields.
This creates an additional revenue of GHS 3.6 billion for the current fiscal year.
- Government should exercise its right under the Aker petroleum agreement (Deepwater Tano) to repossess the block or compel the immediate commencement of development by the contractor.
This field has the potential of delivering up to 100kbpd yielding over GHS5.6bn per year to the government.
- Expedite reforms to enforce property taxes. With landed properties of circa 2,200,000 in Ghana (Ghana Population and Housing Census 2021), we anticipate that achieving an average annual rate of GHS1,000 per property at a collection efficiency of 50%.
This will yield the government over GHS1.1bn in revenue.
- Rise above politics and fully enforce the VAT invigilation that saw the rise of VAT revenue by 1000% in some cases.
This assumes a 15% over the 2023 estimated VAT collection of GHS23.7bn
- Pursue the recovery of funds lost through financial irregularities of MDAs in the Auditor General’s Reports (2015-2022). Source: 2nd Fiscal Recklessness Index Report, 2020 (page 2).
This creates an additional revenue of GHS 13.9bn billion.
- Pursue the recovery of the over GHS5bn tax evasion in the petroleum downstream sector (2016-2021). Source: CBOD Petroleum Industry Report 2020/21.
This creates an additional revenue of GHS 5bn billion.
- Divest loss-making, defunct and troubled 17 State-own enterprises (as identified and announced by the Ministry for Public Enterprises).
This creates an additional revenue of GHS 1bn billion.
- Privatize selected SOEs to Tier-2 pension funds to drive efficiency and productivity. The government will realize funds from the divestiture with ownership still retained by the workers of Ghana. These SOEs may include the Electricity Company of Ghana (ECG) and Ghana RE.
This creates an additional revenue of GHS 20bn billion.
- Review and rationalize the budget of SOEs and increase capping of high revenue generating SOEs to shore up central government revenue and reduce waste in SOEs
This creates an additional revenue of GHS 1bn billion.
- The BOST Margin should be converted into a levy and channelled into government revenue. BOST is a fully commercial entity and it is untenable to continue to tax the public to fund its activities while it charges commercial rates for its services.
This creates an additional revenue of GHS 300 million.
- Revise royalties for new and yet-to-renegotiate mining leases from the standard 5% to 15%. For example, the payback period for the new lithium mines is less than five months with an internal rate of return of 224% and yet government royalties is set at 10%.
Not estimated
Expenditure
- The budget provision for the energy sector shortfall of Ghs23bn should be revised downwards by GHS3bn through the reduction of transmission losses, technical losses, and administrative inefficiencies. Effectively implement the Energy Sector Recovery Programme (ESRP) recommendations
This creates an additional revenue of GHS 3 billion.
- Cap the subsidies on the premix petroleum at Ghs200mn thereby reducing the budget by GHS150mn. Owing to the wanton abuse of this subsidy, provide discount coupons to registered fisherfolks for the purchase of premix.
This creates an additional revenue of GHS 150 million.
- Maintain the 2022 capital expenditure level by reducing the non ABFA MDA and foreign finance Capex provisions by 50%.
This creates an additional revenue of GHS 10.7 billion.
- Reduce transfers to statutory funds. Except for DACF, NHF and GETFund, the transfers to all other statutory funds should be reduced significantly from the 15% of tax revenues approved in the 2023 budget to 10%. Special focus may be placed on GNPC, Ghana EXIM Bank and MIIF.
This creates an additional revenue of GHS 7 billion.
- Review and right-size MDAs and SOEs to maintain compensation expenses equivalent to 2022. This should include drastically reducing the number of MDAs, Ministers, and staff at the Office of Government Machinery (e.g. Presidential Staffers).
This creates an additional revenue of GHS 6.5 billion.
- Review the Free SHS Programme to make it more efficient through effective targeting and allowing parents who can pay to do so. Beneficiaries should be students that patronize Senior High Schools in their communities whilst other students should pay for boarding. However, the government can pay for students who do not have Senior Secondary schools in their communities.
This creates an additional revenue of GHS 1 billion.
