Use 1% VAT Increment to Fund Free SHS – IEA

The Institute for Economic Affairs (IEA) says the NPP government’s source of funding for the Free SHS program is not sustainable.

The government has announced that its much touted Free Senior High School policy will commence in September this year.

The policy will, however, be enjoyed by only students who pass their Basic Education Certificate Examination (BECE).

The Minister of Finance, Mr. Ken Ofori-Atta has also disclosed that the free SHS policy will be financed from the Annual Budget Funding Amount (ABFA).

He noted that an amount of GH¢7,382.79 million has been allocated for the education sector for the year 2017; out of which GH¢4,310.20 million, representing 58.38 percent, will go into basic education expenditure.

But the IEA is recommending domestic funding sources for the flagship program of the government including increasing VAT by 1% for the funding of the project.

“We believe that free and all inclusive educational system is a major driver and indeed a catalyst for sustainable growth and development. However, we are concerned about the sustainability of the financing source of this program…the annual budget funding amount which contributes the major part of the total amount is not [only] stable but highly volatile.

“This is due to the dynamics in the oil and gas industry specifically relating to fluctuating oil prices which poses a risk to sustainable funding of this initiative. Given the important nature of this initiative for country’s sustainable development, we are therefore calling on government to revisit its funding arrangement for this important initiative.

“We believe that a more sustainable funding should be pursued domestically…by increasing the VAT rate by 1 percent and re-fencing it for exclusive funding of the free SHS will be very ideal.”