Of course, it cannot be both. Having followed the arguments surrounding the passage of the E-Levy, I have found that, those who are overwhelmingly opposed to it are made up of two groups: the hypocrites and the ignorants.
Therefore, the target of this article is those opposed to the E-Levy without proposing alternatives for it.
For those who are
Read full articlefor it, it can be seen that they have so far been unable to convince us why it should be implemented at this time and at the rate of 1.75%. This minority pro-E-Levy are mostly pro-government leading me to logically conclude that they are just being loyal to their government and party.
With this logical understanding of the stands of the pro-E-Levy, what logical explanation are those opposed to it giving? For the avoidance of doubt, I am against the levy in its current form, hence, I may be a hypocrite or ignorant.
First of all, we have been hearing for decades that our economy has been running on a budget deficit and that this deficit has been fluctuating over time. In simple terms for those who don’t understand, it means the country has always been projected to spend more than what it generates as income.
This is the situation of any rational human being, the economics in us will give him/her two options; to either reduce spending or raise more money. As found by economists, I need to make a strong assumption before we can continue with this discussion. I assume that there are no leakages and corruption. These are directly related to the two options, and if not held constant, our analysis will not be understood clearly.
On the issue of reducing expenditures by the governments, it looks almost impossible as the Ghanaian economy has been growing in all sectors driven largely by population growth. This requires expansion in social and physical infrastructure to meet the needs of the growing economy.
Investments in urban areas are inevitable as urbanization is a direct result of developing economies like Ghana; standard roads to accommodate traffic, quality drinking water, sanitation and waste management, stable source of electricity, educational infrastructure, efficient transportation system, etc.
On the rural front, it is the same story as investments in agriculture, road infrastructure, electricity, etc. are very critical.
Aside these basic and needful expenditures, political parties have had a field day in burdening the already distressed budget with the “freemania” expenditures with tacit approval from the citizenry.
The manifestoes of the political parties are judged on the amount of “freebies” it contains, and less on revenue generation.
As if that is not enough, we hail free things which are not previously captured in manifestoes and sometimes not in the budget under the year in review. No one stops to ask the question; where is this money coming from?
It can therefore be concluded that the country will continue to experience increasing expenditures on our needful expenditures and investment alongside our tacit approval of the so-called freebies.
On the other side of the coin is revenue mobilization to meet the ever-increasing expenditures mentioned above. There are basically two main streams of government revenue; taxes and borrowing.
With an economy largely dependent on agriculture and the exploitation of natural resources, the hope of expanding these sectors to increase revenue flows is bleak. In a bit to increase revenue flows, other countries have diversified their economies from dependence on the extractive sector to tourism, fashion, sports, ICT, and industrialization.
However, these involve long-term planning with huge capital investment, which our current financial record is less likely to support. The practical option and perhaps the easiest way which most of the governments have been doing is to increase taxes/widen the tax net or borrow to meet their yearly expenditures.
The issue of E-Levy is specific to the governing New Patriotic Party (NPP).
Even though this government has a track record of implementing various social intervention policies, they were implemented within a framework of cost-sharing or in an insurance policy model. Irrespective of the intended purpose, this current administration, has directly put money in the pockets of Ghanaians in the name of 'free' education, water, electricity, fertilizer, money to constituencies, etc.
Additionally, their “one this, one that” programs further added more pressure to government spending. Despite this, the government also promised and executed the scraping of 11 taxes they considered “nuisance' taxes. Within the same context of this administration, one cannot discount the fact that COVID 19 put a lot of pressure on the country’s expenditure despite inflows as the results of the same.
Putting the two (expenditure and revenue flow) together, data point to the fact that this government has spent far more than the immediate predecessor, which is attributable to the plethora of campaign promises they attempted fulfilling, like the free SHS, one district one factory, one village one dam, one constituency one warehouse, one constituency one million dollars, etc, coupled with COVID 19 expenditure. The figure below shows the trend in Ghana’s fiscal balance since 2008, which has always been negative.
The overall fiscal balance is the difference between the country’s revenue (including grants) and the total expenditure. The negative values mean we have always spent more than we generate. However, it is usual that this value is often very high in election years, as can be seen in 2012, 2016, and 2020. COVID-19 in addition to the expenditures listed above could be blamed for the abnormal peaking in 2020.
From the figure, it can be concluded that this current government has been spending more than their revenue compared to the previous administration (2012-2016). Now let us see how they have been dealing with their revenue financing; between 2016 and 2020, the government has increased expenditure by 89% (96,400.43-51,125.04) million Ghana cedis, but could only manage a 64% revenue increase (55,132.25-33,678.17) million Ghana cedis.
Within this same period of revenue shortfall, the government has increased the public debt by 139% (291,630.72-122,263.02) million Ghana cedis, consequently increasing the Debt to GDP ratio from 55.63% to 76.19%. All the data hereby referred are from the Bank of Ghana (BOG) (https://www.bog.gov.gh/economic-data/government-operations/ )
Let’s now settle the matter on the title of this article. Are the anti-E-Levy without alternatives hypocrites or ignorant? The answer to this is my personal opinion based on the discussion above in the perspective of the assumptions made earlier.
All those who are aware of the facts and context discussed above, and still opposing the E-Levy, without proposing alternatives are the hypocrites. The proposal for the IMF package has come up strongly, however, just as they oppose the E-Levy, this group of people will still use it against the government if they patronize it. This group while opposing the E-Levy is bastardising the government for the record of borrowing when they know the alternative to borrowing is increasing taxes or reducing expenditure.
Is it not clear from the numbers that the government has exhausted the borrowing option and now turning to the taxes? What then do they want the government to do given the facts of the current situation above.
There wouldn’t be much to say about the ignorant anti-E-Levy, because they are assumed to be oblivious of the context discussed above.
However, just as ignorance cannot be excused for man-made laws, it can’t stand in natural law.
Ideally, this group should have known that the free things offered in the manifestoes are not manna from heaven and should have questioned where the money is going to come from. They should also have been aware of the fundamental law in economics ingrained in every human that 'there is no free lunch'.
Culturally this has been expressed in different ways as in the saying “cheap things are costly”. Also in my native Dagbanli language, it is often said that “if you buy a donkey at a price almost free, it will not be able to climb a hill”. The cost of government expenditure especially the freebies are worth more public debt and taxes like the E-Levy.
In conclusion, the hypocrites should stop frustrating government business by simply opposing the levy without its alternative, because like the ruling party, “Economy hia sika”.
To every Ghanaian, a time has come for us to bite the bullet by accepting the E-Levy or its alternative as the price we pay for subscribing to manifestoes that want to spend “freely” on us, without telling us the source of the money. I think the technocratic side of our finance minister has been consistent with this position long ago and is currently espousing the same in the knee-jerk E-Levy town hall meetings across the country. WE CAN’T EAT OUR CAKE AND HAVE IT.
PS: My personal alternative to the levy is not expressed here because of the focus of this article. I will find time for that in another write-up.
File photo/ opinion
