Gov’t to suspend 20% of budgeted expenditure for 2022 – Finance Minister reveals
Government is said to suspend about 20% of budgeted expenditure for 2022.
This is according to the Minister for Finance, Ken Ofori-Atta.
Making the assertion at a press briefing on Wednesday, January 19, the Finance Minister noted the move implies government’s fiscal consolidation agenda is not going to be only revenue-led but also expenditure-focused.
“We are also strengthening expenditure management in 2022 and beyond. To ensure that we match all expenditures to revenue inflows, all expenditure commitments in 2022 will be adjusted to match revenue collection.
“Therefore, in accordance with Section 25 of the Public Financial Management Act (PFMA) law, the quarterly expenditure ceilings of the approved budget will include up to a 20% downward adjustment, beginning in the first quarter of 2022, in commitments across board for all covered entities benefiting from the 2022 Budget, subject to revenue performance,” he remarked.
“This means that our fiscal consolidation agenda is not going to be only revenue-led but also expenditure focused,” he added.
Government’s projected expenditure for 2022, which has already been approved by Parliament is GHS 135.6 billion.
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E-levy to ensure strong domestic revenue mobilization
Mr Ken Ofori Atta has said that government must remain focused in getting the E-Levy bill passed to ensure strong domestic revenue mobilization.
The Minister said this while answering questions on what the government’s Plan B is for the economy and revenue generation if the E-levy is not passed.
Speaking at the press briefing, he noted that there cannot be absolute agreement on government’s policies.
“There is no way we can have absolute agreement.
“We are going up by 40 per cent with regards to revenue mobilization and then expenditure is also going up by 25 per cent. We have always been very good about being able to to cut down on expenditure appropriately when we don’t meet our target.
“With this new dawn of GRA exceeding targets, we expect that to continue. With the new national ID system, now 15.5 million people are going to be on their books.
“That is what gives me the excitement into the future because when I read the Fitch Report, you are doubting that we can make our revenues but I am confident that we can. They are worried that we can’t come to the international market, we are saying its fine, we have our SDRs that will suffice for the first half and then we will figure out another method.
“So plan B is to stay focused and ensure that we get our E-levy through, ensure that our domestic revenue mobilization is strong and with that, we do not need to go the market.”
The E-levy proposal in the 2022 budget statement has sharply divided Parliament as the opposition MPs have rejected the proposal.
The Minority Leader Haruna Iddrisu said the policy proposal is a disincentive to the growth of the country’s digital economy.
To that end, he said, the Minority would not support it.
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Speaking at a post budget workshop in Ho on Saturday November 20, he said, “Mr Speaker, understandably, we see that the Minister of Finance seeks to introduce some measures including the now popularly declared e-levy or digital levy as some have quite named it.
“Mr Speaker, our concern is whether the e-levy itself is not and will not be a disincentive to the growth of digital economy in our country . We are convinced that the e-levy may as well even be a disincentive to investment and a disincentive to private sector development in our country. We in the minority may not and will not support government with the introduction of that particular e-levy . We are unable to build national consensus on that particular matter.”
Finance Minister Ken Ofori-Atta announced this levy to be charged by government in 2022 on all electronic transactions to widen the tax net and rope in the informal sector.
“It is becoming clear there exists enormous potential to increase tax revenues by bringing into the tax bracket, transactions that could be best defined as being undertaken in the ‘informal economy,” Mr Ofori-Atta observed on Wednesday, November 17 as he presented the 2022 budget statement in Parliament.
“After considerable deliberations, government has decided to place a levy on all electronic transactions to widen the tax net and rope in the informal sector. This shall be known as the ‘Electronic Transaction Levy or E-Levy’.”
He explained that the new E-levy will be a 1.75 per cent charge on all electronic transactions covering mobile money payments, bank transfers, merchant payments and inward remittances to be borne by the sender except inward remittances, which will be borne by the recipient.
This will, however, not affect transactions that add up to GH¢100 pr less per day.
“A portion of the proceeds from the E-Levy will be used to support entrepreneurship, youth employment, cyber security, digital and road infrastructure among others.”
This new levy was scheduled to start Saturday, January 1, 2022.
In 2020, total value of transactions was estimated to be over GH¢500 million with mobile money subscribers and users growing by 16 percent in 2019.
According to a Bank of Ghana report, Ghana saw an increase of over 120 percent in the value of digital transactions between February 2020 and February 2021 compared to 44 percent for the period February 2019 to February 2020 due to the convenience they offer.
This was heightened by the advent of Covid-19 especially during the lockdown.
