Tax exemption reforms yield results — Ofori-Atta
The radical tax exemption reforms introduced by the Ministry of Finance (MoF) this year have started yielding positive results, with revenue from import duties rising steadily.
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Reports from the Ghana Revenue Authority (GRA) said, for instance, that GH¢7.22 million was received as import duty in the first eight months of the year, an increase over the GH¢5.95 million recorded during the same period in 2016.
Total tax exemption recorded in the first eight months of 2017 also amounted to GH¢1.22 million, representing 11 per cent of the total import duty collected within the period.
At a press conference in Accra last Monday, the Minister of Finance, Mr Ken Ofori-Atta, in a speech read on his behalf, said the amount was also lower than the total tax exemption of GH¢1.76 million, representing 30 per cent of the total revenue recorded in the first eight months of 2016.
In the 2017 budget statement and economic policy, the government committed to a comprehensive review and reform of the import duty exemptions regime and tax reliefs, with a view to eliminating abuses and improving efficiency in the application of those incentives.
As an interim arrangement, and to facilitate the reforms, the Ministry of Finance instituted an administrative measure that required exemption holders to pay in advance all applicable import duties and taxes and apply for a refund with supporting evidence.
This administrative measure took effect from April 1, 2017.
Mr Ofori-Atta said since April 1, 2017 when the policy was instituted, it had proved to be helpful in many ways.
“We have come to understand some of the abuses that threatened the integrity of our tax exemptions regime and denied the public purse of significant revenue,” he stated.
Lessons learnt
He said the benefits of the new policy had exposed the blatant irregularities that had characterised the country’s tax exemption regime.
“We have uncovered that some importers who do not have exemption status take unlawful advantage of the consignment arrangement in our import regime to consign their imported goods to exemption holders as though the goods are for the exemption holder,” he noted.
He said those importers did that with the connivance of some senior officials in the exemption-holding company.
“We have also discovered, especially in the importation of petroleum products, that some companies that have import duty exemption have found clever ways of extending that exemption to cover domestic taxes as well. They get licensed petroleum importers to import these items and place them in bonded warehouses.
“As we know, taxes on goods that are being warehoused are not paid immediately; they are paid when the goods are being cleared from the warehouse. Exemption holders then buy these products directly from the bonded warehouses minus the import duties on the items, meaning the importers of the goods who are not exempted from import duty payment have been able to clear the goods without the payment of the import duty,” Mr Ofori-Atta explained.
New measures
The minister said the government had now appreciated the weaknesses in the tax exemption regime and introduced new measures that would better deal with the shortcomings.
He said the government had decided to discontinue the requirement for exemption holders to provisionally pay the import duty and taxes upfront and apply for a refund later.
“Exemption status will also not be transferrable. Under no circumstance shall any person or business be exempted from the payment of any import duty or import tax by virtue of its association or relationship with an exemption holder,” he indicated.
Mr Ofori-Atta said no imported goods would also be exempted from the payment of import duties and taxes unless the original importer of the goods, as stated on the bill of lading or customs declaration, was an exemption holder or the goods were generally exempted from import duties and taxes by law.
He said those and many other measures that were all geared towards strengthening the country’s tax exemption regime would take effect from October 1, this year.