2018 Budget Review: VAT Increased In “Disguise” – Terpker

A former Finance Minister Seth Terpker has challenged government’s stance that it has not increased VAT in the 2018 mid-year review budget.

“I wish to assure the House that VAT will not be increased. I would like to advise our friends in the opposition that they should stop taking policy direction on the economy from social media,” the Finance Minister told Parliament on Thursday, 19 July 2018.

Delivering his statement, he announced that as part of the new revenue measures, the government will now levy the NHIL and GetFUND separately.

“Both the Health Insurance Fund and the GETFund levies will continue to be 2.5 percent each, while the applicable VAT rate is 12.5 percent. Government is therefore, consolidating contributions to the Health Insurance Fund Levy and the GETFund portion of the VAT into a separate Health and Education Levy. This will enable the Government isolate and increase the budget for health and education,” Mr. Ofori-Atta revealed.

However, in his response Mr. Terpker noted his successor is throwing dust into the eyes of Ghanaians.

“Ghana’s VAT rate is 17.5 percent and that includes NHIL (2.5%) and GETFund (2.5 %). Removing them from the VAT base and making them specific rates (instead of ad valorem) and increasing that rate to earn more revenue (quoting Hon Kwarteng) is a ruse.

“It is a VAT increase in disguise. Businesses should not rejoice yet because they cannot claim Input Tax Credit/refunds on 5% of the current 17.5 percent rate.

“Already, the Flat Rate is denying some registered businesses refunds and Input Tax Credit.

“The measure amounts to a parallel Sales Tax regime that the VAT replaced. It is a retrogressive step and further mutilation of the VAT regime,” Mr. Terkper explained.

Meanwhile, the government has imposed a luxury vehicle tax on vehicles with a capacity of 3.0 litres and above.

Mr. Ofori-Atta announced that based “on the under-performance for the first five months of 2018, we will end the year with an estimated deficit of 4.9% of GDP compared to the programmed target of 4.5%, resulting in a fiscal gap of GHs870 million, unless we immediately implement some fiscal measures; intensive tax compliance measures, New revenue measures, Intensive Conversion of NHIL (2.5%) to a straight levy, Conversion of GETFund VAT rate of 2.5% to a straight levy, Imposition of luxury vehicle tax of GH¢1,000-GH¢2,000 on non-commercial vehicles with capacity of 3.0 litres and above.”

Source:Starrfmonline.com