Widening tax net riskier- Rashid Pelpuo

Former Minister of State in charge of Public-Private-Partnerships Dr. Rashid Pelpuo has advised government to be cautious in widening the tax net since not all businesses will be in position to absorb it to spur growth.

“Their reliance is on casting the tax net wider but this is not a permanent source of income, it does not mean that if you cast the tax net wider you are constantly going to rake in more money.

Of course you can rake in more money but what about if the businesses there are unable to provide the kind of resources you expect to be able to meet some expectations so that is a big challenge.” he told B&FT in an interview.

The maiden budget of the Akufo-Addo Administration, presented by the Finance Minister on March 2, 2017, saw the downward revision of certain taxes while others were completely abolished.

Some of the tax cuts include; abolishing the one per cent special import tax, market tolls paid by kayayei, the17.5 per cent Value Added Tax/National Health Insurance Levy (VAT/NHIL) on financial services and the 17.5 per cent VAT/NHIL on domestic airline tickets among others. Only last week, Parliament approved four tax bills to enable government enforce tax cuts outlined in its budget.

Furthermore, government has stated that it will source funds from the domestic market, but it will be done in a strategic manner that will not crowd out the private sector.

“Government’s decision to borrow from the domestic market has been influenced by a cautious strategy that will ensure the amount to be borrowed does not crowd out the private sector in the capital market,” Chief Director at the Ministry of Finance, Patrick Nomo said at a budget sensitisation workshop.

However, Dr Pelpuo who is also the Member of Parliament for Wa Central explained that; “You are borrowing more than GhS4billion from the public, if you are borrowing this much money, how are you going to prop up businesses-where is business going to get the money because the more government borrows, the easier it is for the banks to operate without the poor businessman who wants to come there without enough collateral, so they will crowd out the businesses that they think they will stimulate.

They are going to give all the money to the government and it will come down to a worse situation.” he added.

He further described government’s promises in the budget as “bizarre which will sulk the economy”.