The Minister for Finance presented the Budget Statement and Economic Policy of the Government of Ghana for the 2024 financial year (“Budget Statement”) to Parliament on 15 November 2023. The Budget Statement was under the theme “pursuing growth & development within a stable macroeconomic environment”, which is locally referred to as the “NKUNIM Budget”.
It was stated that the 2024 budget is even more significant because the Gross Domestic Product of the country will cross the GHc 1 trillion mark, which will be the first time in our economic history. This happens to be a good call; however, citizens do not see any significant impact on their livelihood. This is because the inflation rate is on the rise, unemployment seems to be increasing, and many others.
Revenue and Expenditure Assessment
The motive of this document mainly focuses on the fiscal developments of Ghana’s economy from January to August 2023, which will be compared with previous years and some projections outlined in the 2024 budget.
To begin with, the total revenue and grants were projected at GHc 82.2 billion in 2023, but GHc 79.1 billion was recorded as of August 2023. Relating this to the 2024 revenue projection, the economy is expected to record revenue of GHc 179.4 billion, which is approximately higher than the revenue projection for 2023 by about 118%. Is this achievable as per the previous data, or is this just being inflated to help meet the estimated expenditure for 2024?
In addition, the projected expenditure for 2023 was GHc 121.8 billion, of which GHS 104.6 billion was recorded as of August 2023. This represented 12.2% of the Gross Domestic Product. In the 2024 budget, total expenditure is projected at GHc 226.7 billion, which indicates an 86.1% increase in the 2023 projection.
According to the projected revenue accumulation and expenditure spending in 2024, it can be deduced that the economy will record a budget deficit of GHc 47.3 billion, which is a deduction of expenditure from revenue projected figures. It is believed that this excludes arrears that need to be cleared. However, as stated in the 2024 budget, the total budget deficit will record an amount of GHc 61.9 billion, including arrears clearance.
Under trade, industry, and export, non-traditional exports are expected to increase to US$4.8 billion in 2024 from US$4 billion in 2023, which indicates a 20% increase.
Tax Components
It is believed that of all the taxes introduced and revised since 2017, Ghana’s target of 18–20% tax-to-GDP ratio has still not been achieved. As of the period under review, the country’s tax-to-GDP ratio now stands at 13%. Due to this, it was stated in the budget that this has made the tax reliefs and structural reforms difficult to implement. Meanwhile, some relief measures would be put in place to cushion the hardships in the country. Some of these tax reliefs include:
- Extend the zero rate of VAT on locally manufactured African prints for two (2) more years: The introduction of this tax relief was to help local manufacturers be on par with smugglers of cheap textiles in the country and also reduce its rate. This aims to support the local textile industry. This marks the policy’s second consecutive extension. Since the introduction of this tax relief, the industry has seen a significant improvement, and this needs to be commended.
- Waive import duties on the import of electric vehicles for public transportation for a period of 8 years: This is expected to encourage the adoption of electric public transportation. However, what is significant to note is whether or not “we are ready to meet the demand for these electric cars powering in terms of electricity since the country is in some way experiencing load shedding in some parts”? Is this in any way going to impact positively on the citizens’ livelihood?
- Waive import duties on semi-knocked-down and completely knocked-down electric vehicles imported by registered EV assembly companies in Ghana for a period of 8 years.
- Extend the zero rate of VAT on locally assembled vehicles for 2 more years: It is true that the introduction of this tax relief in the early years was to decrease the importation of vehicles and boost production in the country because paying no VAT on locally manufactured cars was better as compared to paying 12.5% VAT on imported cars. However, this seems not to have had any significant impact on the majority of citizens, but rather on the manufacturers.
- Zero-rate VAT on locally produced sanitary pads: This happens to be a more anticipated tax relief for the citizens of the country. This relief will go a long way in reducing the prices of sanitary pads and also decreasing the importation of such commodities, making them more affordable to purchase.
- Grant import duty waivers for raw materials for the local manufacture of sanitary pads: This helps to reduce the cost of production and also boosts local production.
- Grant exemptions on the importation of agricultural machinery equipment and inputs, medical consumables, and raw materials for the pharmaceutical industry.
- A VAT flat rate of 5 percent to replace the 15 percent standard VAT rate on all commercial properties will be introduced to simplify administration.
- Waivers on the importation of vehicles by the Ghana Medical Association: This waiver is the government’s response to the petition by the Ghana Medical Association to help them procure vehicles to ease their transportation and service delivery.
Some taxes will also be reviewed in order to cover a wide tax net. This indicates that some taxes will be increased, of which the possible ones are as follows;
- Review to expand the Environmental Excise duty to cover plastic packaging and industrial and vehicle emissions.
- Review of the Stamp Act, 2005 (review of rates and fees for stamp duties): This is a tax imposed on documents or specific instruments that have legal effect. It is not a tax on transactions but on documents brought into being for the purpose of recording transactions. The payment of proper Stamp duty on instruments makes them legal. Such instruments have evidential value and can be admitted as evidence in a court of law.
- The expansion of ad valorem taxes and specific rates. An ad valorem tax imposes a tax on a good or asset, depending on its value.
- A simplified tax return will be introduced as a means of promoting voluntary compliance as part of the modified taxation scheme for individuals in the informal sector.
In general, it is a relief to see certain tax burdens lifted from ordinary Ghanaians. However, extending some tax nets will enhance the country’s revenue base, but these funds should have a good impact on the livelihood of ordinary citizens. Meanwhile, entering an election year raises the question of whether the present government will be able to sustain the previously announced anticipated budget deficit or whether it will be exceeded. Let’s see what happens.
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He has a degree in Economics and is a researcher at the Center for Economic Freedom Policy & Development at YAFO Institute. He is also the Development Manager at the Institute and liaises with the entire team to oversee growth projects by creating development plans and identifying market opportunities.
