[ 2014-11-23 ]

2015 budget will sink the economy further - Bawumia
The 2015 budget as presented to Parliament last
week by Finance Minister Seth Terkper demonstrates
clearly government has no clue how get out of the
fiscal mess it plunged the economy.
This is the verdict of Dr. Mahamudu Bawumia, 2016
Vice Presidential Candidate of the NPP on the
government’s financial and economic policy
statement for next year.
“The 2015 budget demonstrates one thing for
sure. The NDC government has created a fiscal mess
after 6 years in office but has no clue how to
deal with it,” he told the UK Branch of the
Young Executives Forum of the NPP in Milton Keynes
on Saturday.
Dr. Bawumia, reports say, thrilled the partisan
audience with his remarkable insight on the
Ghanaian economy, and used the opportunity to do
an elaborate review on the 2015 Budget presented
by the Finance Minister on Wednesday, November 19,
2014.
“The government’s focus is on raising revenue
to hide the fiscal indiscipline. However, it is
clearly more of an expenditure mismanagement
problem. The budget does not address expenditure
review and re-composition and measures to ensure
fiscal discipline, but rather focuses on the
revenue side (raising more taxes), clearly being
insensitive to the population and taxing them to
hide inefficiencies. There is a saying that ‘if
all you have is a hammer everything begins to look
like a nail.’ This is so appropriate in the case
of this NDC Government,“ he said.
Dr. Bawumia referred to the 17.5percent Petroleum
Tax and said it showed how the government was
totally lost in its handling of the current
economic crisis.
“This Special Tax on petroleum products is bound
to also increase the already high cost of doing
business in the country. At the time when many
businesses are having to pay for diesel to run
generators as a result of load-shedding, they are
being asked to pay more taxes on fuel. This would
increase the cost of production.
“We strongly believe that that this tax measure
is unwarranted. If the deep seated waste and
reported corruption in payroll maladministration
is corrected swiftly, enough savings could accrue
to the budget and this tax measure could have been
avoided. If the leakages are not plugged, then no
amount of tax increases would solve the
problem,” the former Deputy Governor of the Bank
of Ghana observed.
Dr. Bawumia also touched on the taxes imposed on
the financial and real estate sectors as examples
of how the government had totally gotten it wrong
in its approach to correcting the mess it has
created.
“In the 2014 budget the Government pushed
through against sound arguments, a VAT on
fee-based financial services. The confusion
surrounding its implementation resulted in the
withdrawal of the policy measure. In their
desperation to raise tax revenues, the 2015 budget
states that this VAT on fee-based financial
services will be implemented. This is a bad policy
for the economy. Ghana’s financial system is
underdeveloped with only some 20% of the
population having a Bank account. What the
government should rather be doing is providing
some incentives for financial inclusion. The
introduction of VAT on fee-based financial
services would only serve to drive people away
from the banking system with the attendant
reduction in financial savings. It will also
increase the cost of doing business for the
business community”, he said.
Speaking on the Real Estate sector, Dr. Bawumia
noted that, “Some statistics on the property
market in Ghana would be instructive in placing
this VAT on real estate transactions in context.
First, Ghana currently has the highest mortgage to
income ratio (at 605%) in the world. In terms of
House Price to Income ratio, Ghana is the 10th
highest in the world. In terms of housing
affordability, Ghana ranks as the least affordable
property market in the world. Given these facts,
it is clear that the real estate industry in Ghana
needs help. Government should rather be trying to
encourage the development of the mortgage market
through tax incentives for real estate developers
and better land administration. A 5% VAT on real
estate transactions is the wrong way to go."

Source - MyjoyOnline

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