Business

No need for new taxes in mid-year budget review – Tax policy analyst

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A tax policy analyst, Dr. Alex Ampaabeng, has advised the government against introducing new taxes in the 2023 mid-year budget review, which is expected to be delivered on July 27.

He said that while it is important to shore up domestic revenue, imposing new taxes on Ghanaians could “choke the country.”

Dr. Ampaabeng was speaking at an event held in Accra on Thursday by the Economic Governance Platform, an umbrella body comprising 15 civil society organizations (CSOs) and policy think tanks.

He said that the Domestic Debt Exchange Programme (DDEP) led to some 80% of banks in Ghana reporting losses in their last financial statements, which meant that the government also lost taxes in effect.

“Due to these losses, the banks cannot support other sectors in the economy. That means, the businessman who needs to take a loan to work and get money and pay tax won’t also be able to do so, and there’s a rippling effect on every other sector of the economy,” Dr. Ampaabeng remarked.

He said that the results from the introduction of the electronic invoicing system by the Ghana Revenue Authority (GRA) demonstrate that efficient tax implementation could make the government rake in more revenue.

“Bank of Ghana (BoG) data show that in the last quarter, year-on-year VAT grew by 92%, and it was not by magic. It’s because of the e-invoicing that GRA introduced. Hitherto, companies were underpaying their invoices,” he said.

“Where were those who were not paying the VAT?” he asked. “So, underpayment of taxes is a problem. It’s not about overburdening the few who pay the taxes, but expanding the tax net to ensure that all those who qualify pay.”

The tax policy analyst explained that in the last eight months, the cost of electricity in the country has increased by more than 50%, as well as water, as inflationary and exchange rate pressures have remained.

“Everything in the country has gone up, so the cost of doing business is high. How do you expect businesses to be able to make the needed profit for you to get the taxes?” Dr. Ampaabeng asked.

“Therefore, it would be wrong to introduce new taxes. Instead, the government should make sure that there are more robust tax administration strategies and integrate electronic systems in all aspects of tax administration,” he said.

He reiterated calls for the government to consider the reintroduction of the abolished road toll levy and scrap the electronic transactions levy (E-levy), which he said had failed to meet its intended revenue targets since its introduction.

Dr. John Kwakye, an economist with the Institute of Economic Affairs (IEA), also asked the government to implement pragmatic measures to earn more from the country’s natural resources, including gold, cocoa, diamonds, and oil.

“The government must take bold steps to stop foreigners from taking about 85% of the country’s natural resource wealth to their countries, while Ghana can only boast of 15% of the natural resources,” he said.

Dr. Kwakye also called for enhanced collaboration between the Bank of Ghana (BoG) and the Ministry of Finance to strike a balance in the monetary and fiscal measures.

He urged the two institutions to adopt multipronged approaches to tame inflation and other economic pressures as the government embarked on reforms supported by the US$3 billion International Monetary Fund (IMF) bailout program.

Source: GNA

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