Question Tag: Tax suspension

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:

1. Taxes on individual income (referred to as pay-as-you-earn) will be suspended until 2029.
2. 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%.
3. 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%.
4. 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.