What Economists Expect From 2014 Budget

APPIAHThe government must use the 2014 budget to give policy direction on how the informal sector is taxed, says Economist and Financial Analyst, Sydney Casely Hayford.

“I will like to say that government should have a clear policy regarding taxation in the informal sector. Government has to be very clear that there is a policy in place to ensure that we tax the informal sector very quickly,” he said.

Speaking in an interview with Times Business in Accra yesterday on his expectations about the 2014 budget, he said the government was not doing enough in taxing the informal sector.

“There are taxes collected in the informal sector, the market fee or what we call ‘lempo’ are a fraction of what the informal sector is capable of contributing, and government is not keeping up with these monies at all,” he said. Mr. Hayford said, “If government does this every year, the budgetary deficit will be between two and 3.5 billion cedis. In 2013 alone, the budget deficit went close to 8.5 billion cedis, which was an aberration.

“This time round, government has to narrow the gap and I think they can get enough support from the informal sector.”
On expenditure, he said the government must find a way to reduce the burden on the payroll, saying that the current situation where the government had to use 70 per cent of its revenue in paying for wages did not auger well.

“I am saying that this portion of government payroll can be trimmed significantly. Government should stop taking care of the things it does not necessarily have to go into. And, I cite particularly the education and health sectors,” he said.

In the educational sector, Mr. Hayford said the government should stop trying to run schools, particularly the Junior High and the Senior High Schools.

“Government is involved in picking up the payrolls and paying all the bills, something normally profit-making schools can do. If we critically look around, the most demanding parts of our economy, are the educational and health sectors. Anyone who is in the private sector in health or education, is making a lot of money,” he said.

The government, he said should move away from running schools readily and voucher pay for students who were going to school.
“So, if government stops paying the payrolls for both educational and health sectors, it will free itself from all the expenditures and for the private sectors to pick it up.The government can then focus on better infrastructural development. All other social protection programmes can be rationalised by government; moreover, these social protection programmes, are platforms for corruption anyway.

Because these programmes are poorly managed, there are no monitoring and evaluation going on and nobody accounts for the monies,” he said.

“What we need to see in this year’s budget is the clear policy regarding the private-public policy programme, which we need to develop from the District, Municipal and the Metropolitan Assemblies all the way to the national level,” he said.  Mr. Collins Appiah, an economist, NDK Assets Management Limited, in a separate interview   wanted the government to use the 2014 budget to address the budget deficit to restore stability in the economy.

He said the widening budget deficit if continued, would dampen investor confidence in the economy.
At the end of 2012, government recorded a deficit of nearly 12 per cent with a target of reducing the deficit to nine per cent and to six per cent over the medium-term.

This, according to government, would be achieved through fiscal consolidation which would focus on improved financial management including debt management and improved revenue collection.
Mr. Appiah said the government’s expenditure must not be on consumable goods but rather on infrastructural projects which would lead to the growth of the economy.
“We want the government to look at expenditure that will bring revenue to the nation,” he said. He said the government must increase the tax base to include more players in the informal sector rather than hiking taxes which constraints businesses.
Mr. John Gatsi, a Chartered Economist and a lecturer at the School of Business, University of Cape Coast said the government in the budget must clearly spell out how projects and programmes promised by the president would be executed.

“We want to see how many community schools will be built and how the government intends to raise the money for all the projects,” he said.

He said the government must also use the budget to review incentives that were provided for companies especially those within the free zones.

“Most companies operating in the free zones are granted incentives to enable to export but most of them end up selling their products in the local market. We should provide incentives or subsidies that benefit the economy not those that hurt the economy,” he said.
Mr. Gatsi said the government must use the budget to give hope to Ghanaians and foreign investors by finding ways to control inflation, depreciation of the cedi and interest rates.

“I want to see the budget as the one that would reduce expenditure and rather generate more revenue. Ghost names on payrolls must be cleared to make more revenue at the disposal of the state,” he said.

Meanwhile, a statement issued by the Ministry of Finance and Economic Planning in Accra at the weekend said the budget would focus on the policies to bring down the deficit, accelerate infrastructural development and sustain growth to maintain confidence in the Ghanaian economy. “It will also detail the achievements for year 2013 and government’s projections and policy objectives for the medium term,” it said.  By David Adadevoh


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