LAST year, revenue generated from the country’s trade with foreign companies and institutions rose by 10.9 per cent to GH¢6.1 billion.
The rise in taxes on international trade from GH¢5.5 billion in 2017 to last year’s figure spark concerns of a rise in duties and levies paid on imports as speculated by some importers in the country.
Provisional fiscal data from the Ministry of Finance showed that the government missed its revenue target of GH¢507,59 million by 7.6 per cent against the GH¢6.6 billion projected to collect in the 2018 budget.
However, exemptions granted to foreign companies under the review period reduced by 23 per cent to GH¢2 billion compared to that of the previous year.
A Fiscal Policy Specialist at Oxfam Ghana, Dr Alex Ampaabeng, in an interview last week observed that the development brings to the fore, the country’s inability to control the amount of tax freebies granted to foreign firms despite several pledges by the government to cut it.
“I will attribute this to the growing tax exemptions in the country. Within eight years (2010 – 2018), Ghana’s tax exemption grew by 167 per cent, with majority linked to import/export taxes.
“This significantly affects our revenue performance and put pressure on the government to seek external support (borrowing) which comes with high servicing cost for years,” he said.
He observed that taxes on international trade had significant impact on overall revenue performance of a country, particularly in developing countries where the size of the informal economy greatly affect the tax base.
“Countries within the sub region including Ghana believe that by charging the lowest tax rate or giving our more breaks, businesses, especially the multinationals will relocate to their jurisdiction.
“However, there are real credible data which shows that tax exemption is not the major deciding factor for companies to operate in a particular jurisdiction.
“Ghana has a stable and well-grounded democratic system, an increasing affluence level (rising purchasing power), skilled labour force, dominant youth population and many factors which businesses tend to consider before taxes,” he added.
Although an incentive for Foreign Direct Investments (FDIs), import exemptions granted to investors and other institutions have been a major drain on national revenue.
Of particular concern is the strong growth over the years. From GH¢778.9 million in 2012, tax exemptions rose to GH¢1.2 billion in 2014 before almost doubling to GH¢2.1 billion in 2015.
The exemptions are always granted to businesses coming into the country through the Ghana Free Zones Authority (GFZA), the Ghana Investment Promotion Council (GIPC), diplomatic and development institutions, as well as specialised bodies such as members of the Ghana Medical Association.
Address high import duties
On high import duties, Mr Ampaabeng indicated that the government needed to dialogue with key stakeholders to ensure that the taxes levied reflected taxable activities and also in line with best practices and tax policies in neighbouring countries.
“As we know, in response to high duties, some importers buy (imported) goods from our neighbours including Togo and Nigeria. This will tend to increase taxes in other jurisdictions (as their import/export grow) at the expense of Ghana.
“The time to dialogue and find a lasting solution is now. All these uncertainties have huge impact on the economy, especially on the job market,” he said.
According to him, the government had done well recently by introducing measures to tackle the leakages in the ports.
Those measures, he said would bring some confidence in the system in the long-term.
The specialist stated that the government’s target of GH¢7.42 billion revenue in 2019 was a definite possibility if the right decision would be taken to address key challenges.
First, he said the issue of tax exemption was very critical area that needed an urgent attention. This is an area that as a country we all should support and get it right.
“Last year, we had GH¢6.1 in trade taxes and gave huge exemptions. If the government reviews the exemptions, I believe there are some that may be modified or abolished altogether which will bring in revenue.
“Again, I believe we will start realising some of the gains of the new system at the ports from 2019. With a reduction in human interface, the rampant revenue leakages at the ports will begin to reduce so I expect some marginal gains in 2019,” he added.