The Institute of Fiscal Studies has described the government’s revenue target for 2024 to be overoptimistic and difficult to achieve.
According to the research institute, the government has had a tradition of over-targeting revenue and for instance, in 2022 and 2023, the government budgeted total revenue and grants to be 20% and 18% of Gross Domestic Product respectively.
“However, in the 2024 Budget, the government has targeted to collect only 16.8% of GDP in total revenue and grants”, it said in its critique of the 2024 Budget.
“One would therefore be tempted to argue that the 2024 revenue projection is realistic and thus obtainable. Nevertheless, we still see it to be overoptimistic and difficult to achieve”, it added.
Furthermore, the institute said excluding the pandemic-induced outturn of 14.1% of GDP in 2020, total revenue and grants have ranged narrowly between 15.0% and 15.8% of GDP since 2017, despite the various revenue measures outlined in previous budgets.
In addition, revenue has never improved beyond 0.4 percentage points of GDP in any year during the period.
Therefore, it explained that for total revenue and grants to GDP ratio to break beyond the upper bound of 15.8% of GDP by a full 1.0 percentage point to 16.8% in 2024, there should be more robust revenue policies supporting it.
“Yet, the 2024 budget’s revenue policies are not much different from what has been pursued in the past, despite the government’s development of the Medium-Term Revenue Strategy, 2024–2027. In fact, the anticipated improvement in revenue in 2024 is based, largely, on revenue measures such as excise tax increases, imposition of a growth and sustainability levy, and some changes that have been made to the income tax act that were introduced in 2023 but whose full effects are expected to be realized in 2024”, it stressed.
It continued that these measures failed to improve revenue in 2023 even though most of them came into effect in May 2023.
It added that the total revenue and grants to GDP ratio, which was expected to improve on account of these measures, is projected to decline to 15.7% in 2023 from 15.8% in 2022.
Domestic revenue to increase to ¢173.30 billion in 2024
Domestic revenue is budgeted to increase from a projected outturn of ¢131.40 billion in 2023 to ¢173.30 billion in 2024, while foreign grants are budgeted to increase from GH¢2.47 billion to GH¢3.11 billion in the same period.
Of the budgeted domestic revenue in 2024, tax revenue is ¢143.17 billion, representing 82.6%, while the sum of non-tax and other revenues is ¢30.13 billion, representing the remaining 17.4%.
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