Laboured

Ahead of the 2024 budget declaration, the Ghana Federation of Labour (GFL) has urged the government to reassess onerous taxes in the…

Ahead of the 2024 budget declaration, the Ghana Federation of Labour (GFL) has urged the government to reassess onerous taxes in the country, particularly excise levies on the beverage industry, as they hinder business growth. GFL urged the government to create a more favourable environment for businesses and workers. Meanwhile, Ghana’s public debt service consumed over half of its domestic revenue in 2022, as per the Institute of Statistical, Social and Economic Research’s report. An alarming 56 percent of domestic revenue went toward servicing the national debt in 2022, and external debt exceeded domestic debt, reaching 55.3 percent of Ghana’s GDP by the end of 2022.

According to the International Monetary Fund (IMF), Ghana faces fiscal challenges primarily due to its structurally weak domestic revenue mobilisation. To address this, various reforms are on the horizon, including VAT rate increases, E-levy restructuring, removal of customs value discounts and revisions to income-based taxes, expected to contribute 1% to GDP by 2023. Trade unions advocate for the removal of various taxes. Still, the government is in a dilemma regarding whether it can remove any taxes from the 2024 budget without adversely affecting its agreement with the IMF. Ghana has committed to enhancing its revenue mobilisation as it awaits subsequent disbursements from the IMF. Therefore, any tax-related policy changes require the IMF’s approval under the three-year programme. Noteworthily, the controversial E-levy, introduced to raise $600 million, may miss its target for the second time, potentially affecting the government’s 2023 revenue goal. Under the IMF programme, tax revenue’s contribution to GDP is projected to rise from 13.1% in the previous year to 14% by the end of 2023, with further increases expected in the following years. The formal sector predominantly contributes to tax revenue, while the informal sector’s share is limited. As Ghana’s debt servicing obligations increase rapidly, securing debt relief in domestic and external contexts is vital to prevent excessive debt burdens. A Domestic Debt Exchange Programme has already saved the government up to $6 billion in 2023, and further efforts are expected at the external level, where a substantial portion of Ghana’s $30 billion external debt is up for restructuring. The 2024 budget will be crucial, incorporating IMF programme elements and outlining key expenditures. Ghana aims to boost its tax-to-revenue ratio from 78% to over 80% in 2024 while implementing measures to curtail wasteful spending.