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Business News of Friday, 20 July 2018

Source: citinewsroom.com

New levies will benefit the economy – Kwaku Kwarteng

Deputy Finance Minister, Kwaku Kwarteng, has said the new levies announced during the Mid Year Budget Review were necessary for the long-term health of the economy.

The government plans to separate the Health Insurance Fund Levy and the GETFund component from the Value Added Tax (VAT).

These two components will now have straight levies of 2.5 percent. Though the Akufo-Addo administration promised a shift from taxation, Mr. Kwarteng said political expediency would not keep the government from doing the right thing.

“When you are in government, your job is to do what is in the interest of people; what is in the interest of the broad economy,” Mr. Kwarteng stressed on Eyewitness News.

“When you are confronted with a gap and you worry that unless you close that gap, the consequences on the economy down the line will be more hurtful, for me it is the dishonest politician or economic policy manager that says I know that this is what I have to do to bridge this gap now but I won’t do that because if I do that, people will say that I am going back on my word and that might have political consequences.”

“Immediately a policymaker starts thinking like that, you know they are not managing an economy, they are doing politics.

During the mid-year budget review, Finance Minister Ken Ofori-Atta said these new levies, among others, are to ensure the government meets its fiscal deficit target of 4.5 percent of GDP.

Despite these moves, Mr. Kwarteng maintained that the Akufo-Addo government still believes that “you cannot run an economy by imposing taxes on your businesses and your citizens.”



Indirect VAT increment?

Ahead of the budget, speculation was rife that the VAT might be increased outright.

But that turned out not to be the case.



But critics have argued that separating NHIL and GETFund levies from the 17.5% flat VAT rate is a VAT increase in disguise.

The Finance Minister under the Mahama administration, Seth Tekper said attempts at consolidating the Health Insurance and GETFund levies were a ruse.

“Ghana’s VAT rate is 17.5 percent, and that includes NHIL (2.5%) and GETFund (2.5 %). Removing them from the VAT base and making them specific rates (instead of ad valorem) and increasing that rate to earn more revenue (quoting Hon Kwarteng) is a ruse,”