VAT increase unwarranted – IEA

The Institute of Economic Affairs (IEA) has described the current Value Added Tax (VAT) increase as unwarranted as it would further burden taxpayers and reduce competitiveness of Ghanaian businesses.

The Government has increased the VAT rate by 2.5 per cent, bringing it to 17.5 percent.

Dr John Kwakye, Senior Fellow of IEA, said if Government needed extra revenue, it could intensify the collection of rent income and property tax to support the economy.

Dr Kwakye was speaking to journalists on Government’s 2014 Budget Statement and Economic Policy presented to Parliament in Accra on Tuesday.

He said the Institute had always argued against the increasing tax rates since the Ghanaian taxpayer was already overburdened.

He said raising the tax efforts from 17.3 per cent in 2013 to 19.3 per cent in 2014 was un-ambitiously feasible, but added that the Institute welcomed measures to broaden the tax base to include the informal sector.

The Senior Economist said the Institute welcomed the measures to support the agriculture sector through the modernisation scheme and the establishment of the SME Fund to support the manufacturing sector.

“We have long maintained that agriculture and manufacturing are the bedrock of the economy where most employment is going to come from and need as much support as possible,” he added.

Dr Kwakye commended the President and his appointees for the decision to take a pay cut of 10 per cent to support the health sector.

He said it was important Parliament paid attention to Government’s spending adding; “setting up an independent, multi-party Parliamentary Budget Office will probably be the best way to do it”.

Source: GNA