Tax exemptions in the form of import duty; import VAT, import NHIL and domestic VAT cost the nation a whooping sum GH₵4.66 billion in 2018, representing 1.6 per cent of the country’s GDP.
This amount did not even 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 waiver of processing charges at the ports.
Delivering the state of the nation address in Parliament last Thursday, the President, Nana Akuffo Addo said the country’s tax exemption policy was 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 16 years, half of Ghana’s revenue base will be given away as tax exemptions,” he stated.
“Mr Speaker, 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 that many have become accustomed to, but which we have to take to ensure that we have the firmest of foundations for the economic take-off that has escaped us for so long,” he added.
With domestic revenue mobilisation posing the biggest challenge for the government, the President believed it was time for a rethink of the policy.
Speaking in an interview with the GRAPHIC BUSINESS on Feb, 22, Tax Expert with accounting firm, PWC Ghana, Mr Abeiku Gyan Quansah also called for a national conversation and a possible review of the tax exemption policy.
He said a lot of these exemptions were coming from the petroleum and mining sectors who pay 35 per cent corporate taxes instead of the 25 per cent paid by other corporate bodies.
He said it was therefore necessary to delve more into why these exemptions are granted to players in those sectors.
“The risk in operating an upstream oil and gas is different from doing buying and selling. Government has a 10 per cent carried interest in any mining company and aside the 35 per cent corporate tax, they pay five per cent royalties,” he explained.
“In view of all these, the companies also appeal that the state doesn’t charge them custom duties on the machines they import for their operations. Is that what we are calling exemptions?” he asked.
“We need a national conversation on whether we will want to put them at 25 per cent corporate tax just like any other company so we wouldn’t have to grant them any exemption,” he noted.
Free zones concept
Mr Gyan Quansah also called for a national conversation on the free zones concept.
“If we think we no longer need it, it is our law so we can say that the 1995 free zones Act is not helping us so we want to repeal it,” he said.
Govt still considering exemptions
He said what was surprising was the fact that the government itself was still considering exemptions even in the wake of all these
“One thing that beat my mind is that in 2019, the government itself is talking about exemptions.
We say we want to give exemptions to one district one factory companies; wouldn’t that increase the exemptions figure? We want to give exemptions so that we can begin to use electric cars in Ghana, the textile people are getting a zero rate, meaning they are not going to pay VAT as others,” he indicated.
“Why do we continue to give these exemptions? Do we have better alternatives? This is where the direction of the conversation should be,” he added.
“If we want to depart from the current tax exemption law, we can easily go back to Parliament and repeal it,” he said.