Accounting and auditing firm, KPMG, is charging government to adopt innovative ways to raise additional revenue, whilst exhibiting prudence in spending.
This it believes is the only way to create the needed fiscal space to achieve targets and priorities in the 2021 Budget.
In its post budget forum participated by the Finance Minister Designate, Ken Ofori-Atta, and other stakeholders, Senior Partner, Anthony Sarpong, urged government to continue its digitizing process and system efforts to ensure businesses thrive and survive in a competitive global environment.
The 2021 Budget is focused on activities targeted towards economic recovery following the pandemic. This KPMG believes is important to ensure that businesses and individuals are cushioned and supported to build more capacity for growth.
The key priority areas of the Budget include delivering COVID-19 containment measures and vaccination, creating and sustaining jobs, implementing the GhanaCARES Programme, promoting entrepreneurship and wealth generation and making fiscal space for implementation of priority programmes.
Revenue mobilisation is crucial for the achievement of these priorities. Government will require innovative ways to raise additional revenue and contain expenditure levels so as to create the fiscal space to realise these targets and priorities”, Sarpong pointed out.
Government in the 2021 Budget announced indirect tax measures and reliefs in order to manage the fiscal challenges experienced last year, whilst providing some respite to businesses badly hit by covid-19 pandemic.
On the tax measures introduce to shore up revenue, KPMG, said the financial clean-up levy will create fiscal space for government, but the banks were already paying the 5.0% fiscal stabilization levy.
It also said the 1.0% increases in VAT Flat Rate and the National Health Insurance Levy will result in additional cost to businesses and individuals, stressing out “the increase in the NHIL will therefore increase the base for calculation of VAT”.
With regard to road tolls, it called for digitization in order to receive the funds in advance whilst minimizing leakages.
Government should also consider digitisation of the toll collection infrastructure and allow for the prepayment of tolls by road users. This will help government to receive the funds in advance and also minimise leakages that such systems are exposed to.”
On the tax reliefs such as suspension of Tax Stamps for small businesses, KPMG pointed out that the proposed measures will grant them additional cash flows.
However, government should consider working capital support in resumption of normal business for targeted sub sectors.
Additionally, government should consider an extended loss carry forward period, in respect of COVID-19 specific losses, to support recovery in these subsectors [hospitality, education]”
It also said the introduction of the Ghana National Identification card to replace the TIN and SSNIT numbers can potentially expand the number of registered tax persons to 15.5 million. However, the key concern is how this information would be practically utilised to achieve the expected increase in tax revenue.
For sector initiatives, the accounting and auditing firm said the continuation of the flagship programmes such as Planting for Food and Jobs signals the government intent of sustaining productivity gains in food production.
Also, the Ghana Land Information Bank providing reliable information on land has the potential to facilitate commercial farming operations.
However, KPMG advised government to turn its attention to easing access to sustainable water resources to support its vision of boosting commercial farming.
On financial services, it said the proposed interventions in the insurance sector could boost the penetration of insurance services in the country.
While there have been significant improvements in access to insurance services in recent times, overall penetration of insurance services remains relatively low.”
In recognition of the transport sector’s crucial role in national development, the budget proposed a number of road, rail and aviation initiatives.
As the focus turns to completing ongoing projects, KPMG said it is important that government also considers a structured framework for the evaluation of sources and structure of project financing for sustainability.