The Research Consultancy Centre (RCC) of the University of Professional Studies (UPSA), Accra, has asked the government to consider the reintroduction of the luxury vehicle tax, as a way of widening the revenue base.
Government withdrew the luxury vehicle tax in July 2019, a year after its introduction. The Minister of Finance, Ken Ofori Atta, who announced the withdrawal, said at the time that suggestions from the general public on the implementation of the tax, led to the withdrawal of the levy.
The University also believes the government must intensified efforts at collecting property tax by leveraging the national digital property addressing system.
Government must equally find creative ways of taxing small and medium size online businesses to improve its revenue generation.
According to the UPSA, tax compliance remains a major problem in the country, especially for the informal sector, and to reduce tax evasion, the digitisation drive must be enhanced to track revenues and tax collections in both the formal and informal sectors.
The UPSA made the recommendations after analysing the 2021 budget themed, “Economic Revitalisation through Completion, Consolidation and Continuity” at its Economic Dialogue Series, a platform to contribute meaningfully to Ghana’s economic policy and discourse.
The dialogue covered three thematic areas namely revenue, expenditure, and debt: suggestions on how to improve revenue generation; reduce debt and ensure prudent spending, and the way forward.
The UPSA observed that “among the revenue sources, grants seem to be the type with minimal economic consequences. However, grants are a small component of the revenue sources”, and recommended that the government must ensure that leakages in the revenue basket are sealed, using technology and strengthening of revenue related public institutions.
The university further suggested a continual improvement in the revenue administration and sustained efforts at reducing corruption to reduce leakages in the revenue basket.
EXPENDITURE
The UPSA noted that there is a need for the government to reduce ‘wastage’ in the system such as reducing the size of government drastically.
Again, the government must stimulate the economy by investing significantly in sectors that are growth driven such as the agriculture and industry sectors.
In the service sector, the UPSA opined that the government should invest in emerging businesses such as personal protective equipment (PPEs) and internet services.
“Governments, irrespective of which party is in power must ensure the timely continuity/execution of contracts awarded to avoid unnecessary cost accruing from penalties and judgment debts”, the UPSA added.
According to the UPSA, the Phase II of the Ghana CARES programme should be implemented with a broad stakeholder engagement, within well targeted spending lines.
PUBLIC DEBT
On the management of public debts, the UPSA recommended that government should give priority to smart borrowing, that is borrowing should be used for productive ventures rather than for recurrent expenditures such as payment of wages.
The university pointed out that an appropriate amount should be borrowed, if necessary, to complete the project/purpose for which such loans were contracted so that the nation can reap the full benefits.
The UPSA observed that while the 2021 budget contains enough policy directions to overcome the challenges confronting the economy, more focused effort in key areas with multiplier effects are required.
UPSA stressed that there must be concerted efforts to sustain the budget, enhance revenue mobilisation, ensure prudent expenditure of available public funds, management of the fiscals of the economy including enhancing public institutions, using competent personnel.
INNOVATIONS
The UPSA commended government for certain key innovations under revenue generation in the 2021 budget.
In the estimation of UPSA, The proposed collaboration between the Ministry of Finance and the Ministry for the Interior to co-supervise the gaming industry and formulate a comprehensive policy to improve revenue mobilization may lead to improvement in revenue.
The UPSA however cautioned that “While we admonish further expansion of the tax base to increase tax revenue, focus should not be on increasing oil and gas receipts to avoid the ‘Dutch disease’.”
Other areas the government earned commendations included; government’s pledge to review existing road tolls and align them with current market rates, which will improve efficiency, the rebate of 30 percent on income tax due companies; in hotels and restaurants, education, arts and entertainment, and travel and tours for the second, third and fourth quarters of 2021, which will create temporary room for expansion.
The rest are; the suspension of quarterly income tax installment payments for the second, third and fourth quarters of 2021 for small businesses which will bring temporary relief to small businesses, the suspension of quarterly installment payments of the vehicle income tax for the second, third and fourth quarters of 2021, for ‘trotros’ and taxis, which may cushion vehicle owners temporarily against the 5.7 percent increase in petroleum prices and the extension of the waiver of interest as incentive for early payment of accumulated tax arrears may incentivize payment of tax arrears.
The UPSA also commended the government for the proposed establishment of a Development Bank of Ghana.
The post Government urged to reintroduce luxury vehicle tax appeared first on The Chronicle Online.
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