|
Ghana Budgets
Major policies of the ERP and conditions of IMF funding were
that the budget deficit be reduced and that resources be directed
from recurrent to capital spending. Consequently, the government
achieved a budget surplus each year between 1986 and 1989 and
simultaneously boosted the percentage of spending for development
projects. During the mid-1980s, budget deficits as a percentage of
GDP consistently declined, falling from 4.7 percent in 1982 to 2.7
percent in 1983 to 0.3 percent in 1987. To accomplish this, the
government cut spending and reversed its budgetary priorities,
raising capital investment at the expense of increased current
consumption in order to promote future growth. The government
allocated 62 percent of the budget to physical infrastructure and
about 33 percent to the country's productive sector. At the same
time, spending on social programs, including health, education, and
welfare, declined drastically to between 4.7 and 5 percent. As a
percentage of GDP, expenditures on health care fell from 1.2
percent in 1970 to 0.26 percent in 1980-83; during the same period,
spending on education dropped from 3.9 percent to 0.85 percent.
The 1993 budget, consistent with ERP policies and objectives,
aimed to stimulate private-sector growth through lowering taxes on
commerce and corporations and by internally balancing accounts. The
previous budget reduced the tax rate for commerce, printing, and
publishing businesses from 50 percent to 35 percent, bringing these
sectors into line with agriculture, manufacturing, real estate,
construction, and services, the taxes on which were cut in 1991.
Relief for the financial sector was less generous. The tax rate
was reduced from 50 percent to 45 percent to encourage more lending
and better terms for borrowers and to reduce the 8 percent to 9
percent gap between deposit and lending rates of interest. The
government also reduced the withholding tax on dividends from 15
percent to 10 percent, in line with 1991 cuts from 30 percent. The
annual standard personal exemption for individual taxpayers was set
at ¢150,000 (US$380), up from the previous ¢126,000. This figure
reflected a 19 percent increase, 1 percent above Ghanaian inflation
the previous year. The top marginal rate of tax was raised from 25
percent to 35 percent, payable on earnings over ¢14 million,
compared with the previous level of ¢3 million. Finally, import
taxes were reduced or abolished, including duties and sales taxes
on all building materials. The super sales tax on luxury goods,
introduced in 1990, was also abolished. A maximum rate of 10
percent was set on such imports.
Tax evasion and corruption, both of which are rampant
throughout Ghana, severely affected the government's ability to
collect taxes in all categories. In December 1993, the Ghanaian
parliament passed the Serious Fraud Office Bill. This act empowered
the fraud office to investigate fraud and embezzlement crimes
against the state. Despite this action, it is unlikely that the
authorities will be able to stop tax evasion or other white collar
crimes anytime soon. (Country Report 1, 92))
Reform of the tax base and prudent fiscal management
contributed to budget surpluses and dramatically reduced government
recourse to the banking sector. By the early 1990s, nonetheless,
Ghana still relied heavily on external grants to achieve its twin
goals of running balanced budgets and increasing necessary capital
expenditures (see
table 9, Public Finance, 1988-94, Appendix).
Moreover, compared with the rest of sub-Saharan Africa, total
government revenue as a proportion of GDP continued to be
relatively low. It was less than 16 percent in 1990 (including
grants), compared with an average of 19 percent for sub-Saharan
Africa as a whole. In 1993, revenue raising efforts aimed to secure
income equivalent to 22.2 percent of GDP. By 1992 the government's
financial position had weakened. From 1986 to 1991, government
finances were in surplus. In 1992, however, tax receipts from all
sources of revenue were below projected levels, and with national
elections in view, the government relaxed its tight controls on
spending. Despite inclusion of foreign funding as a source of
revenue, the deficit for 1992 was estimated at ¢177 billion but
fell to ¢119 billion in 1993. To rectify the situation, the
government proposed to raise taxes on gasoline, kerosene, diesel
fuel, and liquefied petroleum gas by as much as 60 percent.
Data as of November 1994
|
