2019 budget: Govt to step up taxation as it hopes to exit IMF programme – Prof. Gatsi


2019 budget: Govt to step up taxation as it hopes to exit IMF programme - Prof. Gatsi



Business News of Wednesday, 31 October 2018

Source: www.ghanaweb.com

play videoHead of Finance, University of Cape Coast School of Business, Professor John Gatsi

Government’s plan to pull out of the IMF bailout entered into by erstwhile administration by the end of 2018 may come along with some bitter pill to swallow for Ghanaians.

The intention to exit the programme at the end of 2018 pending a final review by April 2019 with the IMF team will require of government to satisfy the conditionalities set to help Ghana get back on track.

Ahead of the reading of the budget on November 15, Professor John Gatsi, Head of Finance Department at the University of Cape Coast Business School has hinted the realignment of taxes by the government to shore up the country’s revenue.

A key point in the IMF conditionalities is the ability of government to improve its internal revenue mobilisation as that will influence the borrowing pattern of government and make the risk involved less.

Government currently spends close to 98% of its revenue on serving maturing loans and paying emoluments leaving very little to be used for capital expenditure in critical aspects of the economy.

This Professor Gatsi believes may compel the government to ajdust taxes further to improve government’s revenue stream and send a bold statement of government’s preparedness to leave the IMF programme as intended.

“The country is struggling to exit the IMF programme and of the implied condition is to step up our revenue mobilisation and realign taxes for the country. So I do think that that idea to realign taxes further will resurface in the budget in the interest of meeting the criteria to exit the IMF programme but as to the areas that will be done we wait to see from the government” the Department of Finance Head of UCC Business School established.

To clarify his argument he cited the Energy sector levy which many have called on government to review and insisted that it will be a difficult decision for government.

He explained that government needs the revenue generated from the taxes in that sector as it has been used as a hedge for the Energy Sector Bond, however, reducing it to satisfy the demand of motorists and the general public will result in a major funding gap potentially causing a huge headache for government.

“If you reduce the levies it means that the revenue stream from the sector goes down, which means that you have exposed your commitment to the bond and we may see the yield going up and that is not what is expected. Government will have to look at that against the call for a review. It is now left with government to decide whether government wants to heed to the call of the people or it wants to look at the economic reality and the intention to meet revenue targets as a prelude to exit the IMF programme” Professor Gatsi detailed.

Professor John Gasti was speaking on the sidelines of a workshop for members of the Journalists for Business Advocacy, a select group of journalists with interest in business reporting at the Ecobank Headoffice.

He addressed the journalists on the theme, “The Role of Journalists in Economic Reporting” and took them through basic concepts and terminologies of the economy and economic reporting.

The two-day programme to train the journalists has been supported by Bank of Ghana and Ecobank over the past three years and built the capacity of close to 150 journalists nationwide.



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