An Economist with the University of Ghana Prof Peter Quartey has welcomed the new tax on high-income earners if only the monies raised will be used efficiently.
Speaking to Joy News’ Evans Mensah on Top Story, he was unequivocal in stating that no amount of taxes raised will be enough if there is no efficient use of the resources.
On the new VAT regime announced by the Finance Minister, Prof Peter Quartey says the real impact of the VAT will be felt and better analysed with the benefit of time.
While he admits the 5% straight levies for GETFund and NHIS will appear to be an increase of VAT through the back door, Prof Peter Quartey said the tax incidence needs to be worked out properly before a firm conclusion can be drawn as to who will bear the full impact of the new tax regime.
Depending on the goods involved, Prof Quartey said the producer is likely to bear part of the cost of the new tax or possibly pass it on to the consumer.
“It could be an increase in disguise depending on whether we are applying it on the same product as the VAT. The specifics would have to be confirmed by the minister.
“Granted that we are applying on the same product then it is an increase in disguise,” he said in response to assertions by former Finance Minister Seth Terkper that the new tax regime announced by the minister was an increase in disguise.
His comments come hours after the Finance Minister Ken Ofori Atta presented a mid-year review of the 2018 budget with a bold assurance that “there will be no increase in VAT rate.”
There was a pre-budget apprehension that there was going to be an increase in the VAT rate from 17.5% to 21% to make up for the revenue shortfalls.
But in his presentation, Mr Ofori Atta stated mobilizing resources does not only lie in the increase of taxes but also employing a strict tax compliance regime.
The minister said the government will be converting the GETFund of 2.5% on the VAT to a straight levy of 2.5%. Additionally, there will also be the conversion of the NHIS of 2.5% on VAT to a straight levy.
He also stated that a tax regime that allows the rich and wealthy to pay more in helping to raise revenue for development purposes is progressive.
In line with that, he announced a new tax on luxury cars with a consumption rate of over 3 litres. He further announced that workers with an income of over 10,000 will be made to pay a tax of 35%.
These he believes will help shore up government’s revenue in order to wean itself from the IMF control.
But the Minority is not impressed. Casiel Ato Forson who is the Minority Spokesperson on Finance accused the finance minister of increasing the tax through the back door.
He said the new VAT arrangement announced by the Finance Minister will rather make the cost of products go up.
“It is an imposition of tax through the back door,” he said, adding, the country should “brace up for high cost of products.”
The Minister should have said it was an imposition of tax,” he maintained.