The Minister for Information, Kojo Oppong Nkrumah has indicated that the government’s proposed new taxes are to help address the huge fiscal gap created as a result of the government’s COVID-19 expenses.
According to him, the government spent about GH¢ 19 billion of borrowed funds to provide free water and free electricity among other expenses to fight the COVID-19 pandemic and that amount must be repaid.
“That GH¢ 19 billion has to be paid for at some point. The liabilities we have incurred have to be paid for. COVID-19 expenses are going to be with us at least for the medium-term… It does [include free water and electricity] which is part of the COVID-related expenses,” he said in an interview on Joy News.
The government, through the caretaker Minister for Finance, Osei Kyei-Mensah-Bonsu in delivering the 2021 budget last week announced the government’s proposal of introducing six new taxes.
These taxes include a COVID-19 Health Levy; 1% increase in National Health Insurance Levy and 1% increase in flat VAT rate as well as a 30 pesewas increase in fuel prices to take care of excess power capacity charges [20 pesewas] and Sanitation and Pollution Levy [10%].
Some analysts and Ghanaians have already expressed their disagreement with the proposal, indicating it will only lead to more hardship on them.
But Information Minister, Kojo Oppong Nkrumah explained that to the extent that the government has to repay the monies it used to provide some reliefs and support for citizens at the height of the pandemic in 2020, such taxes are necessary.
“It is free to you, it wasn’t free to the treasury. When we say free electricity, it doesn’t’ mean the Independent Power Producer is also going to say because the President has said free electricity, I won’t charge for electricity. The government will have to pay. The government, for example, had to borrow money with a fiscal impact of about GH¢ 19 billion to make all of those expenses happen and in addition to that, there are going to be expenses in the medium term because of COVID-19,” he explained.
He said the government considered the country’s economic situation due to the impact of COVID-19 and arrived at the decision to introduce the new taxes to avert a situation where those debts will create bigger challenges for the country.
“Can we continue to accommodate this COVID-19 black hole in these already- widening gap of our finances, or do we have to introduce a revenue handle that can take care of it and the government comes to a view that with the greatest of respect, can we take 1% VAT to pay for that, so that COVID does not become an overburdening expenditure item for us,” he added.