Government is hoping to dig deep to raise GH¢30.2bn in domestic revenue for the 2015 fiscal year, the guidelines for preparation of the 2015-17 budget prepared by the Finance Ministry and issued to the MDAs and MMDAs has revealed.
The 2015 revenue estimate is a 21.16 percent increase of the 2014 projection submitted by Finance Minister Seth Terkper to Parliament in the July supplementary budget occasioned by several shocks to economy.
The hike in the domestic revenue target is in tune with similar calls made by the International Monetary Fund (IMF) in its May 2014 country report.
The report proposed a “menu of additional short-term adjustment measures” after saying that “in light of Ghana’s significant fiscal and external balances, government [should] target a larger and more frontloaded fiscal consolidation”.
Essentially, the Fund called for higher taxes and spending cuts to reduce the budget deficit more quickly. Its recommendations include higher ad valorem tax or VAT on fuel; hikes in excise taxes; higher taxes on real estate; a freeze on new tax exemptions; and more robust assessment of large taxpayers to generate more revenues from them.
But the guidelines forecast a government expenditure ofGH¢43.5bn, which is about 19.8% higher than 2014’s revised projection of GH¢36,358.3million.
With the country currently in advanced negotiations with the Fund on a possible programme, the Finance Ministry is expecting the Bretton Woods institution to determine the focus of the budget statement for the 2015 fiscal year.
In spite of the more than 20 percent raise in the revenue targets, it is worth noting that these guidelines were issued in June, months before the country opened negotiations with the Fund — therefore it is not immediately known how a Fund programme could have impacted on these estimates.
Nevertheless, guidelines issued to the Ministries Department and Agencies (MDAs) and the Metropolitan, Municipal and District Assemblies (MMDAs) by the Finance Ministry wants them to detail out measures and activities to be implemented in 2015-2017 to increase revenue generation and improve collection, accounting and reporting. These measures, according to MoFEP, should include measures to eliminate revenue leakages.
As part of the measures to lift domestic revenues, MDAs/MMDAs have been asked to review current data on revenue collection as well as the fee-fixing resolutions of the current year. To improve on the internally generated funds (IGF) mobilisation, MMDAs have also been mandated to also review IGF collection strategies and produce a report on the revised strategies.
The fiscal position of the country has been challenged in recent years, particularly with an increasing expenditure and a lower than expected revenue inflow.
The guidelines issued in June emphasise strongly the need to control the spiralling wage expenditure — arguably government’s biggest short-term challenge.
One of the measures government is targetting to control the rising wage bill in the upcoming fiscal year is to keenly monitor its payroll, introduce efficiency, as well as reduce the payroll cost.
The MDAs/MMDAs have been tasked to ensure that they come up with comprehensive action plans on payroll management systems, which the ministry said should “include proper alignment of management units and staff as well as running regular variance analysis report from the system to know the performance of their compensation budget. This should be done in collaboration with Public Services Commission and Fair Wages Commission”.
Apart from measures to tame the wage expenditure, the 2015 budget statement is also expected to announce more measures that will boost declining tax revenues.
According to the guidelines, “Any MDA/MMDA that seeks to make a provision for tax exemption/incentives in a loan or international agreement should clear it with Ministry of Finance before incorporating such into the loan or international agreement”.
source : B&FT