President Akufo Addo hints at adjusting tax exemptions

February 25, 2019 / Comments (0)


President Nana Addo-Dankwa Akufo-Addo has expressed worry over the burden tax exemptions granted foreign companies and individuals place on the economy, saying they are no longer sustainable for the country and will soon undergo review as government looks for ways to improve mobilisation of revenue for national development.

Tax exemptions in respect to import duty, import VAT, import NHIL and domestic VAT, the president said, have grown to GH¢4.6billion – representing 1.6 percent of GDP in 2018. These figures do not include exemptions from the payment of corporate and individual income taxes, concessions on tax rates, petroleum tax reliefs, Customs tax exemptions enjoyed by diplomatic missions, and waivers of processing charges at the ports.

Overall, tax exemptions are estimated to have cost the country more than US$2.4billion in 2018, which represents more than 4 percent of the country’s GDP – a situation the president has vehemently decried, describing it as an Achilles heel and a growing menace in his State of the Nation Address yesterday.

“Revenue mobilisation poses the biggest challenge in the management of our economy, with the tax exemption policy in particular proving to be an Achilles heel and a growing menace to fiscal stability and revenue generation…If we continue at this rate, in less than sixteen years, half of Ghana’s revenue base will be given away as tax exemptions.

“This is not sustainable, and we intend to do something about it to reverse the trend; by introducing suitable measures that may disrupt the easy and comfortable arrangements many have become accustomed to, but which we have to take to ensure we have the firmest of foundations for the economic take-off that has escaped us for so long,” President Akufo-Addo said.

Government has consistently missed its revenue target, prompting the International Monetary Fund (IMF) to urge managers of the economy to design innovative measures that will shore-up domestic revenue mobilisation.

Government fell short of its domestic revenue target for the third quarter of 2018 by 9.5 percent, realising GH¢31billion from a projected GH¢35billion; a situation Finance Minister Ken Ofori-Atta attributed to “underperformance of both non-oil tax and non-tax revenues”.

The informal sector has long been an area for which government has consistently been urged to develop innovative measures to rope it into the tax net, as it constitutes about 70 percent of businesses in the country.

The sector, in 2017 – the Ghana Statistical Service data show, contributed more than GH¢73billion: 28.6 percent of GDP.

Even though the sector forms a big chunk of the economy, it is estimated that only about 200,000 business from the sector pays tax – representing a measly 2 percent of taxpayers.

To find a solution to this, beginning April 2018, the Ghana Revenue authority (GRA) rolled out a Tax Identification Number (TIN) programme that will ensure all individuals engaged in any business activity in the country will have a TIN.

The purpose is to draw the majority of informal sector actors into the tax net in order to improve revenue mobilisation.

Source: B&FT Online

Leave a Reply

Your email address will not be published. Required fields are marked *