The government’s 2024 revenue target has been deemed overly optimistic and challenging to meet by the Institute of Fiscal Studies.
The government has a history of over-targeting revenue, according to the research institute. For example, in 2022 and 2023, the government budgeted for total revenue and grants to be 20% and 18% of GDP, 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.
Moreover, the institute highlighted that, excluding the pandemic-induced outturn of 14.1% of GDP in 2020, the total revenue and grants have consistently hovered between 15.0% and 15.8% of GDP since 2017. This trend persisted despite the implementation of various revenue measures outlined in previous budgets.
Furthermore, there has been no notable improvement in revenue beyond 0.4 percentage points of GDP in any year during this period.
Therefore, the institute clarified that achieving a total revenue and grants to GDP ratio exceeding the upper bound of 15.8% by a full 1.0 percentage point to reach 16.8% in 2024 would require more robust revenue policies to support such growth.
“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.
The institute further noted that despite the implementation of these measures, there was a lack of improvement in revenue in 2023, particularly considering that most of these measures took effect in May of that year.
Additionally, it emphasized that the anticipated enhancement in the total revenue and grants to GDP ratio, as a result of these measures, is projected to decrease from 15.8% in 2022 to 15.7% in 2023.
Domestic revenue to increase to ¢173.30 billion in 2024
The budget outlines a planned rise in domestic revenue from an estimated ¢131.40 billion in 2023 to ¢173.30 billion in 2024. Simultaneously, foreign grants are expected to increase from GH¢2.47 billion to GH¢3.11 billion during the same period.
Breaking down the domestic revenue projections for 2024, tax revenue is budgeted at ¢143.17 billion, constituting 82.6% of the total, while the combined sum of non-tax and other revenues is ¢30.13 billion, representing the remaining 17.4%.