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General News of Wednesday, 7 August 2019


IEA rejects tax increments; want Free SHS limited to 3-per family

Director of research at  Institute of Economic Affairs, Dr. John Kwakye Director of research at Institute of Economic Affairs, Dr. John Kwakye

The Institute of Economic Affairs (IEA) has rejected tax increments announced by Finance Minister Ken Ofori-Atta in his mid-year review and supplementary Budget presentation.

The Finance Minister in his presentation to Parliament last week announced the upward review of taxes on Communications Service Tax and energy levies.

Mr. Ofori Atta announced that Ghanaians will have to pay GHp20 more for a litre of petrol and diesel and GHp 8 more for a kg of LPG.

“Mr. Speaker, you may recall that Government in 2017 issued the Energy Sector Levy Act (ESLA) Bond, which has, to date, raised almost GHS 6 billion on the back of ESLA levies to pay for legacy debts from the NDC’s “dumsor days”.

“The bond proceeds were used to liquidate approximately 60% of the energy sector legacy debts. Government proposes to increase the Energy Sector Levies by GHp 20 per litre for petrol and diesel and GHp 8 per kg for LPG, so as to increase the inflows to enable Government issue additional bonds to pay down our energy sector debt obligations.

Addressing the media on Tuesday, Director of research for the IEA Dr. John Kwakye argued other innovative measures should have been used to generate more revenue for government instead of overburdening consumers.

Dr. Kwakye warned the increments could be counterproductive. He also proposed limiting free SHS to three persons per family as a cost saving measure.

“It has to be said that the decision to increase the taxes, we think it is unfortunate, given the additional burden the increases will pose on already overburdened tax payers. Rather than increasing the taxes, we were expecting the minister to introduce new initiatives to raise revenue.”

“…In its current form, the free senior high school is a very costly one, the number of students involved that likely to mount with additional future streams will compound the cost. It is also very costly for government to offer a whole range of free things under the policy including the fees, other academic charges, books, food, accommodation and uniforms. The mounting free SHS cost will put immense burden on the budget to other equally important projects.

“It will be worthwhile to consider options…first a kind of means testing scheme could be introduced to make financially capable parents pay for their wards…second a government-parent cost sharing arrangement could be arranged where government pays for say academic fees and charges, books and boarding while parents pay for feeding and uniform…third, consideration should be given to the idea of say three students per family.”