This question examines key macroeconomic concepts including types of inflation in Ghana, measures to control deflation, effects of unemployment, impacts of raising minimum wage above equilibrium, and the role of job separation and finding rates.
(a) State four main types of inflation in your country. (b) State two measures that may be adopted to control deflation. (c) List two effects of unemployment. (d) State two possible effects that may arise if the minimum wage rate is increased above the equilibrium wage. (e) The rates of job separation and job finding determine what? (4 marks) (Total marks:20)
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20 Marks
EIB – APR 2024 – L1 – Q8 – Public Finance, Government Fund Allocation, Fiscal vs Monetary Policy, Taxation in Inflation Control
This question defines public finance, explains areas of government fund allocation, differentiates fiscal and monetary policy, and discusses taxation's role in controlling inflation.
(b) Explain four (4) areas where governments allocate funds to meet their spending obligations and fulfil their functions. [8 marks] (c) Differentiate between Fiscal Policy and Monetary Policy. [4 marks]
(d) What is the role of Taxation in controlling Inflation? [4 marks]
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20 Marks
PSAF – Mar 2025 – L2 – Q3- Public sector fiscal planning and budgeting
Examine implications of Ghana's 2025-2028 fiscal policy proposals per PFM Act 2016.
a) The Government has unveiled its transformative agenda, driven by its fiscal strategy, covering the period 2025 -2028. In the Agenda 2028 document released by the government, the following strategies were outlined:
Taxes on individual income (referred to as pay-as-you-earn) will be suspended until 2029.
Development will be driven by debt, with the government leveraging its goodwill to borrow from development partners and investors to fund its development programmers and projects. By the end of 2024, the debt-to-GDP ratio was projected to reach 80%.
There will be significant government expenditure aimed at boosting development and enhancing citizens’ living conditions. Data from 2024 indicate that the fiscal balance relative to GDP stands at 17%.
All forms of extravagance and wastefulness within the public sector will be eradicated to ensure efficiency, effectiveness, and value for money across all government operations.
The statement also noted that the government reserves the right to suspend the fiscal rules and targets as and when necessary.
Required:
i) Examine the implications of the government’s policy propositions (1 to 4) in relation to the principles of formulating and implementing fiscal policy objectives outlined in the Public Financial Management Act 2016, (Act 921).
ii) Discuss the steps and events that will necessitate a cabinet approval for a suspension of the fiscal rules and targets under the Public Financial Management Act 2016, (Act 921).
b) The Public Expenditure and Financial Accountability (PEFA) Framework is designed to evaluate the public financial management performance of public institutions. However, some critics, including the Director of Finance of your entity, argue that PEFA represents a form of neo-colonialism repackaged for Africa, and therefore, African countries should resist its assessment.
Required:
i) Explain to the Director of Finance FOUR reasons your country’s PFM system should be subjected to PEFA assessment.
ii) Discuss FOUR limitations of the PEFA framework used to assess PFM systems.
a) Batakari LTD was incorporated on 1 January 2024, and has since accumulated a lot of input VAT credit it could not deduct because the company was not registered for VAT. The company had not yet registered for VAT because it was yet to start generating revenue, and did not expect any revenue in the 2024 financial year. The company therefore applied for voluntary VAT registration under the Value Added Tax Act, 2013 (Act 870 as amended) on 1 March 2024. However, the Finance Manager of the company upon registering for VAT, and noticing the need to still file monthly VAT returns, intends to apply for cancellation of the company’s VAT registration on 31 March 2025. Required: Batakari LTD needs your assistance on how to go about the VAT cancellation process.
b) As a tax expert, you have been approached by the Junior Accountants you work with in the Finance Department of Mando Advisors. They have been debating all morning on the exempt supplies and zero-rated supplies. According to the Junior Accountants, “exempt supplies and zero-rated supplies are similar, and there is no material difference, if any, between the two, since in both cases, there is no output tax charged”. Required: As an expert, explain to the Junior Accountants the difference between exempt supplies and zero-rated supplies. Your answer should focus on tax accounting and compliance obligations regarding exempt and zero-rated supplies.
c) Dekyiwaa LTD has been registered as a VAT Withholding Agent. The company has received three (3) invoices, and needs your assistance on the amount of withholding VAT to be withheld and remitted to the GRA. Assume the taxes charged on these invoices are in full compliance with the provisions of the Value Added Tax Act, 2013 (Act 870 as amended). Invoice 1 (for the supply of stationery for the business)
GHc
Invoice amount
15,000
VAT @ 3%
450
COVID Levy @ 1%
150
Tax-inclusive value
15,600
Invoice 2 (for the supply of immovable property from an estate developer)
GHc
Invoice amount
570,000
VAT @ 5%
28,500
COVID Levy @ 1%
5,700
Tax-inclusive value
604,200
Invoice 3 (for the supply of internet broadband services from an internet service provider)
GHc
Invoice amount
500,000
NHIL @ 2.5%
12,500
GETFL @ 2.5%
12,500
COVID Levy @ 1%
5,000
CST @ 5%
25,000
555,000
VAT @ 15%
83,250
Tax-inclusive value
638,250
Required: For each of the three (3) invoices above, calculate and justify the amount of Withholding VAT that Dekyiwaa LTD should withhold and remit to the Ghana Revenue Authority in line with the provisions of the Value Added Tax Act, 2013 (Act 870 as amended).
d) Fiscal policy measures are tools for economic management. These are meant to stabilise the economy and minimise distortions. One of such measures is contractionary fiscal policy. Required: Explain how the Government of Ghana could use contractionary fiscal policy to fight inflation. (5 marks)
a) It has been said that there is a thin line between tax planning and tax avoidance. The line is a little thinner when one compares tax planning to aggressive tax avoidance. Required: Explain the areas of divergence between tax planning and aggressive tax avoidance. Do you however think the two may be similar in any way? (10 marks)
b) A conflict of interest occurs when an individual’s personal interests – family, friendships, financial or social factors such as serving two or more competing clients could compromise his or her judgement, decisions or actions in the performance of his/her duties. You are a tax expert at Pompor & Associates, a firm of Chartered Accountants and Tax Practitioners. Your third assignment is to carry out a tax health check into the affairs of one of the clients of your firm where your interest is likely to conflict. Required: Explain how you are likely to manage the actual or potential conflict of interest situation. (5 marks)
c) The Bank of Ghana’s summary of Economic and Financial data has over the years shown the escalating nature of Ghana’s public debt. Successive governments keep blaming themselves that despite the huge debts contracted over the years there is little development across the country. Published statistics also show that the total foreign debts mostly contracted outstrip the total domestic debt. You are the head of the Policy Unit of the Ministry of Finance who work closely with the Chief Director of the Ministry. Required: Draft a report for the perusal of the Chief Director for onward submission to the Minister to be tabled for cabinet discussion on FOUR benefits of foreign debt over domestic debt. (5 marks)
Some commentators in Ghana have argued that economic policymakers should allow automatic stabilizers to shape and direct the destiny of the economy rather than discretionary fiscal policies since the latter has failed woefully.
Required: Distinguish between automatic stabilizers and discretionary fiscal policies as economic tools. Illustrate with examples.
Countries, including Ghana, have embarked on various tax reforms geared towards improving tax revenue to help provide infrastructure and guarantee sustainable growth. Tax administration in Ghana has therefore seen a number of reforms over the years, including restoring the tax base, improving tax administration, and the integration of the Revenue Agencies into an Authority to act as a one-stop shop as per the Ghana Revenue Authority Act, 2009 (Act 791).
Required: In reference to the statement above, analyze TWO challenges (key issues) on tax reforms in Ghana.
a) Monetary policy and fiscal policy are two different tools that have an impact on the economic activity of a country. Policy adjustments and institutional safeguards are needed to ensure that the two policies remain firmly within the region of stability.
Required:
i) Distinguish between Monetary Policy and Fiscal Policy.
ii) State FOUR monetary policy tools used in Ghana.
Efforts to improve Public Financial Management (PFM) Systems in Ghana led to the Ghana Integrated Financial Management Information System (GIFMIS), which is an adaptation of the Integrated Financial Management Information System (IFMIS). The rationale of GIFMIS is to establish an integrated ICT-based PFM system in Ghana at national, regional, and district levels.
Required:
State FOUR benefits of GIFMIS to the government of Ghana.
As the Accountant in charge of the expenditure division, you are to assist the Director of Finance in the ministry to set up a budget committee. You have also been asked to review the recently issued 2020 Budget Call Circular.
Required:
Explain briefly the following:
Medium Term Expenditure Framework (MTEF) including FOUR of its objectives (6 Marks)
Budget Call Circular (2 Marks)
The main difference between MTEF and Budget Call Circular (2 Marks)
The accumulation of external debt is a common phenomenon in developing countries at the stage of development where external resources are needed to bridge budgetary gap.
Required:
a. Explain what is meant by External Debt. (3 Marks)
b. Discuss the causes and likely adverse consequences of the rising level of Nigeria’s total external debt stock. (12 Marks)
Revenue generation is an important role carried out by some agencies of government with a view to meeting the expenditure of government, required for taking care of the welfare of the citizens. Revenue Mobilisation, Allocation and Fiscal Commission Act 1989 specifically mentioned some powers and functions of the Commission.
Required:
a. Identify FOUR powers and responsibilities of State Board of Internal Revenue Service in Nigeria. (4 Marks)
b. Explain FOUR specific functions of the Department of Petroleum Resources (DPR). (4 Marks)
c. Highlight SIX powers entrusted to the Revenue Mobilisation, Allocation and Fiscal Commission. (6 Marks)
d. Explain THREE sources of revenue payable to the federation account in Nigeria. (6 Marks)
Globally, there has been a steady increase in the level of government expenditure in different areas of activities. In Nigeria, there is a steady growth of expenditure over the years which requires explanation.
Required:
Identify and explain five reasons for the rise in public expenditure in Nigeria. (10 Marks)
