Recently Finance Minister Ghana, Ken Ofori Atta petitions parliament to ratify $28 million to be used as car loan for the 275 Member of Parliament. It has been approved and same Ministry has also presented $3.5 million to parliament to be approved for 31 Council of State Members car loan.
The loan is going to be contracted from National Investment Bank(NIB). “The repayment of the facility by the beneficiaries shall be made from deduction at source by the Parliamentary Service of Ghana to the NIB. The repayment by the beneficiaries and the Government of Ghana shall be made at the end of every month for the duration of the agreement,” part of the agreement indicates.
Each beneficiary is entitled to $100,000 payable in 45 months. However, the beneficiaries are to just pay 40% of $100000 without interest which is $40,000 and government pays the remaining 60% which is $60,000 plus an interest of 8.5% on the whole $100,000 amounting to $16588.This means that the government of Ghana is indirectly gifting each beneficiary $76,588(60000+16588).
Professor Stephen Asare popularly known Prof Stephen puts this interesting analysis on his Facebook wall;
“Government borrows $28,000,000 and will pay the bank $32,561,666 over 45 months. The difference of $4,561,666 is interest. That is based on an interest rate of 8.5% as reported.
But the transaction between the State and the beneficiaries cannot in any meaningful way be described as a loan.
Government gives the beneficiaries $27,500,000 (i.e., $100,000 * 275) and the beneficiaries pay government $11,000,000 ($40,000 * 275) over 45 months.
The difference of $16,500,000 plus the interest of $4,561,666 are non-taxable wealth transfer from government to the beneficiaries.
You cannot give someone $100,000 plus interests and ask that they give you $40,000 over 4 years and call that a loan.
Plainly, you are giving the person a non-taxable gift of $60,000 plus interest structured to disguise its substance.
The same “loan” facility is also extended to the 31 members of the Council of State to allow them to perform their part time advisory services. Here, the State borrows $3,500,000 for the purchase of 31 cars on the same terms as earlier described.
Put together, the State borrows $31,500,000 at 8.5% interest just so it can make a tax free transfer in excess of $19,000,000 to only 306 (275 + 31) beneficiaries.
Let us call a loan a loan and a gift a gift. GOGO does not appreciate calling a gift a loan”.
Most Ghanaians are very dissatisfied with the approval for such loans and agreement by the 8th parliament.
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