Former Finance Minister Seth Terkper has waded into the raging debate over the Electronic Levy (E-levy) introduced by government in next yearâ€™s budget â€“ saying, given the deficit at hand, the levy wonâ€™t contribute significantly to addressing the revenue shortfall; hence, better policies and strategies are needed.
Government has projected a deficit of GHÂ¢37billion by end of 2022, as revenue is targetted at GHÂ¢100.5billion against expected expenditure of GHÂ¢135.6billion. Meanwhile, the E-levy is expected to rake in only GHÂ¢6billion.
Mr. Terkper, in an interview with the B&FT, said considering the deficit gap and how much the E-levy is expected to bring in, introducting the tax would just be a distortion. Therefore, the broader issue should focus on how the huge deficit gap can be closed.
â€œThe issue should be how we are going to finance the deficit. The GHÂ¢6billion from the E-levy is a drop in the ocean because we are looking at financing GHÂ¢37billion. So, inasmuch as the E-levy debate is on, government should answer the bigger question about how â€“ without going to the market â€“ it will finance the last quarter.
â€œThe E-levy is not going to significantly reduce the deficit; it is only going to cause distortion. It is going to cause a burden to businesses and consumers in terms of increment in prices and inflation,â€ he said.
He further expressed concern about the back and forth between the minority and majority groups in Parliament regarding the budget approval; saying the situation may escalate into a government shut-down if both sides of the House do not come to a quick conclusion in the matter.
â€œThe time to pass the 2022 Budget â€“ December 31, 2021 â€“ is approaching fast and could make a government shutdown a reality; and Cabinet and Parliament must work expeditiously on a strategy or plan of action for revenue, expenditure, borrowing/loan and real sector initiatives.
â€œA stalemate in Parliament on economic policy continues, the clock is ticking on detailed consideration of the estimates and policies of sector ministries â€“ and poses major fiscal risks of non-passage of budget and closure of government for lack of authority to disburse Consolidated Fund inflows,â€ he said.
The E-levy debate
Previously, the minority in Parliament held the position that the E-levy would take the country backward by affecting small businesses and individuals, especially the poor. This led to some controversies in the House, leading to rejection of the budget on Friday, November 26, 2021 after the majority in Parliament walked out. But on Tuesday, November 30, the decision was revoked by the majority in Parliament after the minority also walked out.
However, the Minority Leader, Haruna Iddrisu, has departed from his sideâ€™s original stance to reject introduction of the Electronic Levy (E-levy) in its entirety â€“ saying they will agree if it is slashed to 1 percent with a threshold of GHÂ¢300.
The Minority Leader said this was arrived at after extensively engaging Finance Minister Ken Ofori-Atta on the matter. He said this at the Ghana Chamber of Telecommunicationsâ€™ 10th anniversary launch.
â€œA week ago, it was no, no, no [that] we wonâ€™t accept E-levy. But having listened to officials in government, including the minister for finance, I was convinced to accept a departure from my original â€˜noâ€™ to accepting a 1 percent E-levy for the good of the Ghanaian people.
â€œIf government is able to make overtures and reach out and say â€˜we want to peg the electronic levy at 1 percentâ€™, I donâ€™t have any difficulty convincing my constituencies. This should be our contribution to fiscal consolidation and our contribution to ensuring that the economy doesnâ€™t collapse on any of us going into the future,â€ he said.