AFAG’S Response To 2011 Budget: The Socio-Economic Impact

PRESS STATEMENT 14/12/2010
AFAG’S Response To 2011 Budget: The Socio-Economic Impact
13th December, 2010
The 2011 budget has undoubtedly exposed the laziness and incompetence of the NDC administration under the leadership of H.E. Prof John Evans Attah Mills. A great number of politicians both internal and external including former Head of State and founder of the NDC party have made public statements without any ambiguity that the Mills administration is very slow and lazy. The NDC hardly keeps to its promises. For instance, they promised neither to increase nor introduce new taxes but a number of taxes have been introduced since the President Mills NDC led government took office.
There is no doubt the NDC has worsened the quality of life of the average Ghanaian. This clearly demonstrates to the nation, the heartless and wicked nature of the NDC government. Quite sadly for Ghanaians, the NDC government has reneged on its promises to deliver the so called Better Ghana Agenda. Despite the fact that, they stated emphatically that the budget was for growth and job creation, the main items in it will rather hamper growth and job creation. The NDC government’s promises to Ghanaians are so far largely unmet. For the sake of clarity we shall enumerate their key promises;
SADA:
The NDC in their 2008 manifesto pledged Two Hundred million cedis to start the Fund and an additional One Hundred million a year to the programme over a ten year period. Characteristically, beyond the initial GH?25,000.000, the NDC government’s 2011 budget contributed only GH? 25,000,000.00. AFAG doubts if the budget allocation to key institutions would be adhered to.


TAXES:
The 300% increase in debt recovery levy has given rise to much controversy as to whether the president is still commitment to reducing fuel drastically. This will have resultant increase in the price of petroleum products which the President promised to reduce drastically.

Environmental tax of 20% on plastics is targeted at companies using plastics such as those in the food, drinks, pharmaceutical and sachet water industries meanwhile in their 2008 manifesto, they promised they would not introduce any new tax. Effectively, plastic related packaged products would become expensiv will be passed onto the final or ordinary consumer. Besides, these areas of the economy particularly, the sachet water employs mostly Ghanaians at the bottom of the social ladder, the ordinary Ghanaian. This is unacceptable and a clear aberration from the NDC’s mantra of not introducing new taxes.

Instead of these punitive and anti- business tax regimes, the Government should come out with a strategic solution to the challenges associated with the plastic or rubber waste management which could help employ more people in the society. This approach has the potential to stifle growth and collapse businesses in the plastics industry and related auxiliary industries. How can this enhance job creation as the main purpose of the budget?

We were told the stabilization levy was for just a year. Yet we see it extended beyond one year. Whereas the NDC raised a haul of rage at what it called high and inhumane taxes, their position as indicated by the budget is going to inevitably worsen the situation.

The talk tax has now been extended to all data and internet service companies. Ladies and gentlemen, the implications for this policy is that, internet browsing would become more expensive. It is disingenuous of or absurd for any government to claim that, this policy would create jobs. This tax would make internet browsing more expensive at a time the industry is struggling to survive. The internet service providers (ISPs) are finding it difficult to stay afloat and the last thing they need is another tax. Is the President Mills NDC government really aware of what is happening to the ISPs.
These taxation policies of this government are clearly dysfunctional to the aggregate performance of the private sector which plays key roles in economic growth and job creation in Ghana. Undoubtedly, the government is taxing the private sector to death. This would kill the entrepreneurial spirit of the private sector and bring the sector to its knees. It seems the government does not care. It has lost touch with reality as it continues on this tax epidemic.

Tax stumps for the informal sector including Makola women, kiosks owners, Kejetia market women would make the poor Ghanaian poorer.
The President, Professor John Evans Atta-Mills further argued that the tax burden on Ghanaians was too high. It is in this context that the NDC promised to amongst others, reduce petroleum prices drastically, reduce water and electricity tariffs, and “introduce measures to provide tax relief for Ghanaians through various tariff and tax measures”. President Mills, what has happened to the social contract with Ghanaians?
For instance the removal of private estate developers’ five year tax exemption and the increase of property rates will definitely increase the cost of accommodation or shelter in Ghana and consequently, leading to homelessness. Besides, the abolition of the tax holiday incentives for Ghanaian real estate investors will lead to the collapse of the sector. The few ones which will manage to survive would surely downsize their staff, leading to unemployment.

The airport tax increase and any other extra charges will definitely increase the overall cost of importation. This tax does not affect the government’s so called ‘rich’ people. Our trade deficit constitutes the evidence that we import far more than we export. It implies that the prices of goods, services and raw materials for the final consumer or ordinary man will go up. Demand will surely go down leading to collapse of some companies and staff retrenchment. How can this serve the purpose of their ‘growth and job creation’ budget? Can we really achieve our budget core objectives? On the aggregate, one can infer that the budget is rather going to stifle growth and job creation in the private sector. It is crystal clear that on the Ghanaian job market, the giant player is the private sector.

The attempt by the government to take a critical look at the self employed in Ghana in terms of their tax obligation is not a bad idea. Broadening the tax net is more appropriate. What is needed most now is ensuring efficiency and effectiveness in the collection of the taxes and their utilization.
AFAG is not against tax adjustment but, it has to be done in a way that will not increase the hardship of Ghanaians but, boost private business growth and make them competitive. Under the current economic conditions and business climate, tax increases could hardly be a positive job creation strategy.

Indeed, the wide range of taxes and tax increases levied on the private sector appears to be deliberate. The Head of Policy and Monitoring at the seat of Government (the Castle) has recently described the private sector as a parasitic sector that deserves to be taxed for development. This demonstrates that the NDC is not committed to the private sector. It is important that the government recognizes that the market women, taxi and trotro drivers, shoeshine boys, cocoa and other farmers, carpenters, chop bar owners, small and medium scale enterprises (SMEs), entrepreneurs, etc. are at the heart of the private sector. The services’ sector of the economy, which now accounts for the bulk of Ghana’s GDP is largely private sector driven. These people are not parasites but hardworking Ghanaians who strive daily to make ends meet
It is incredible that this years’ budget was so silent on the one time NHIS premium. AFAG suspects that this omission was deliberate. It is an indicative of the fact that the NDC have failed in their promise in this sense.
It is astonishing to realize that the NDC government allocated more financial resources to the Office of Government Machinery (GHC 292,921,220.00) than to the Trade Industry (GHC82, 603,136.00). More pathetic is the case of the Ministry of Food and Agriculture (GHC 221, 550,587.00). This is the very government that promised to cut down government administration expenses to make the size of their government lean.
The budget failed to clearly address one of the major purposes of a modern state budget and that is ‘balanced regional development’. The much controversy over unfairly regional distribution of state resources can effectively be managed if this had been taken into consideration. The regional development gaps and demands whether realistic or unrealistic would have been solved.
Ladies and gentlemen, is this the path to the better Ghana the NDC promised Ghanaians? No wonder Ghanaians are poorer and our private sector is uncompetitive.
Ladies and gentlemen, furthermore, what is more worrisome however is the significant accumulation of new government payment arrears in 2010. The government has accumulated domestic payment arrears (payment not made for work executed by businesses and contractors) to the tune of GHC 3.2 billion or over 12% of GDP. This includes arrears from the Single spine salary structure (GHC 1,11 billion), new commitment to GetFunds, DACF, SSNIT, and NHIS.
Ladies and gentlemen, if you add this new accumulation to the stock of 2009 which is GHC 1.1 billion brings the total stock of arrears to GHC 4.6 billion, which means that on arrears basis, the deficits is over 23% of GDP. Is this the better Ghana Agenda? Ladies and gentlemen it is strange to see how this tax ridden budget would be able to create jobs and encourage business growth.

Is this budget really for growth and job creation? WE WISH ALL GHANIANS A MERRY XMAS.
God bless all for coming.
STEPHEN AMOAH 0246912305/ 0200153433
ABU RAMADAN 0270581212
KWABENA BOMFEH 0244535472