Ghana Raises Value-Added Tax to Boost Revenue For ProjectEkow Dontoh and Moses Mozart Dzawu
Ghana will use the extra money raised from a higher value-added tax to fund infrastructure projects starting next year, Deputy Finance Minister Cassiel Ato Forson said.
The increase to 15 percent will provide an additional 745 million cedis ($333.9 million) in revenue, Forson said in an interview on Citi FM Radio today. Parliament raised the VAT from 12.5 percent, he said. Finance Minister Seth Terkper will present the 2014 budget to Parliament Nov. 19.
“The cost of borrowing is high on the international market,” he said. “We must strike a balance between external borrowing and internal resources.”
Africa’s second-largest gold producer will not meet its target of reducing the budget gap to 9 percent of gross domestic product this year because of falling gold prices and a sinking currency, Terkper said last month. The government raised taxes this year, cut subsidies for fuel, water and electricity, and sold dollar bonds to boost revenue after spending ballooned last year ahead of a presidential election.
The cedi has dropped 16 percent against the dollar this year, the third-worst performer in Africa after the rand and Malawi’s kwacha. The currency was unchanged at a record low 2.265 per dollar today in Accra. The yield on the benchmark dollar bond due in August 2023 has risen 35 basis points to 8.35 percent since July.
Some opposition members walked out before the vote on raising the tax level today, Anthony Akoto Osei, a member of the New Patriotic Party who sits on the finance committee, said by phone.
“We have problems with the tax,” he said. “The minister did not follow laid down procedures of the house in bringing this bill.”