In its commentary on the 2018 Budget, PwC Ghana said the measures would be necessary to enable government to achieve the revenue target for 2018.

The 2018 budget projects tax revenue of GH¢39,882 million compared to the 2017 projected outlook of GH¢31,788 million. This is about 25 per cent growth in tax revenues over the expected 2017 performance.

It said while the 2018 Budget Statement did not introduce any new taxes aimed at widening the revenue net, Government was still optimistic that in 2018 it could achieve over 25 per cent increase in tax revenue over the total projected tax revenue for the year 2017.

“Overall, we believe that Government’s revenue estimate for 2018 remains very aggressive and will require further intensification of tax compliance measures,” PwC Ghana said in its commentary on the budget.

“Over a long period of time, Government revenue projections have tended to be over-optimistic, creating the risk of fiscal illusion by providing Government the latitude to over-spend,” it added.

PwC Ghana said incentivising and encouraging the establishment of new businesses would indirectly influence the revenue pool of the country but may not be achievable in the short-term.

It urged government to leverage mobile payment technology to efficiently boost revenue collection in the informal sector.

The implementation of the National Identification Scheme, the National Digital Addressing System, Tax Identification Number System, and the Presumptive Tax System, among others, as enumerated by Government could contribute towards the revenue mobilisation strategy, if implemented effectively.

Fiscal consolidation efforts must be balanced with growth and wide-ranging structural fiscal reforms to be able to sustain the gains over the medium term.

These reforms include measures to broaden the tax base and enhance tax compliance and public financial management, especially considering the large unpaid arrears accumulated in 2016 and the significant revenue shortfall of 10 per cent in 2017.

On the expenditure side, PwC Ghana said while efforts at capping revenue earmarking—a key source of budget rigidities—and limiting exemption abuses are welcome, there is a need for Government to avoid creating another set of rigidities by introducing several social initiatives which are very heavy on expenditure.

For example, the introduction of Free SHS, restoration of teacher training allowances, one constituency one million dollars, the intention to create new regions and zonal development authorities as well as the new nation building initiative intended to hire 100,000 graduates, can exert enormous pressure on Government expenditure.

“These programmes should be carefully phased in, not only to ease spending pressures but also to ensure quality, value for money and proper targeting. We believe that well-planned and sequenced implementation is the only way to make these programmes sustainable over time,” PwC Ghana said.

PwC Ghana acknowledged government’s efforts at ensuring sustainable debt management via debt re-profiling and the gradual normalisation of the yield curve as well as the increasing participation of non-residents in domestic bond issue.

However, it cautioned against over indulgence in this since the dominance of external holders of local bonds could increase the country’s vulnerability to external shocks while the re-profiling can increase debt servicing cost that emanate from the expensive long term debt.

The recent bond issue to cover the legacy energy sector debt and to reduce the stress on the financial sector is also laudable; however, we note that this should not be a substitute for improving the management and governance structure of State Owned Enterprises (“SOEs”).

It said more attention should be given to restructuring these SOEs to ensure their financial viability and return them to a path of profitability.

“It is our view that Government is on track towards achieving macroeconomic stability as evidenced by the fact that macro-indicators are moving in the right direction,”

However, challenges of sustainability of the gains so far and the implementation of various initiatives remain.

We therefore encourage continued focus in the following areas: Aggressive domestic revenue mobilisation effort through enhancing tax compliance; Ensuring Sustainable Debt management: Achieving debt sustainability by accelerating growth for base effect, minimising the fiscal gap and ensuring exchange rate stability to control exchange risk; Increased investment in agriculture value chains and in growth enhancing infrastructure including radical structural transformation to ensure export diversification.