Ghana plans to raise 5.1 billion cedis ($889 million) from new taxes this year to cut its deficit and help smaller businesses weather the fallout from the coronavirus pandemic.
The West African nation will raise 4.1 billion cedis by using technology to make collection more efficient and expanding the tax base, said a Ministry of Finance official who asked not to be named because they’re not authorized to speak publicly on the matter. Another 1 billion cedis will come from an increase in consumption taxes by 1 to 2 percentage points, and by hiking taxes on petroleum and on bank profits.
Some of the new funds will be used to support small businesses, the person said ahead of Ghana’s budget presentation Friday.
“We need some progressive tax increases to share the burden in the midst of the difficulty posed by the Covid-19 pandemic,” Charles Adu Boahen, who is heading the finance ministry in an interim capacity, said in a text message response to questions. He declined to comment on the details of the taxation push.
Africa’s top gold producer is also seeking to reduce a fiscal gap estimated to have reached a 13-year high in 2020, at 11.4% of gross domestic product. The government is targeting a budget deficit of 9% to 10% of GDP this year, the finance ministry official said. Authorities expect it to fall below the legal limit of 5% by 2024, they said.
Central Bank Governor Ernest Addison warned last month that the state would need to raise new revenues and re-prioritize spending to get back on a “sustainable path.” New funds are also needed to mitigate the impact of a second wave of the pandemic on the economy, Addison said.
The tax base is set to grow more than fivefold to 15.5 million after the government makes national identification numbers serve as tax numbers from April 1, President Nana Akufo-Addo said in a March 9 speech.