Economist wants tax policies reviewed
AN economist and finance expert wants Ghana to have a holistic review of its tax policies to, as he puts it, balance revenue needs, private sector growth and household financial well-being.
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The call comes at a time when governments, past and present, have consistently perceived the introduction of new taxes as necessary for economic growth and sustainability, ignoring the impact of such numerous taxes on economic activities.
Last week, the Ministry of Finance announced the implementation of a 15 per cent Value Added Tax (VAT) for residential customers of electricity above the maximum consumption level specified for block charges for lifeline units in line with Sections 35 and 37 and the First Schedule (9) of Value Added Tax (VAT) Act, 2013 (ACT 870), effective January 1, this year.
The move, which forms part of the implementation of the Government's Medium-Term Revenue Strategy and the International Monetary Fund (IMF) Supported Post-Covid-19 Programme for Economic Growth (PC-PEG), has sparked wide public outcry and condemnation because of the impact on the already bad economic conditions businesses, individuals and households face.
Some even fear that the tax on electricity and others is likely to affect the country’s growth targets as the move is expected to increase the cost of operation and slow production. It is also likely to worsen the already bad unemployment situation in the country, which the government is struggling to tackle.
Impact
Professor of Finance and Economics at the University of Ghana, Legon, Professor Godfred Bokpin, told the Daily Graphic in an interview when asked about the impact of the new taxes on the economy that the VAT on electricity consumed, as introduced by the government, would have a negative impact on households and businesses at large.
He said the numerous taxes introduced by the government since the outbreak of COVID-19 were worrying and needed to be addressed immediately to help foster positive growth in the country, stating: “No country has ever developed by taxing its people the way we are doing.
We need to take another look at our tax policy so that we strike an appropriate balance between raising revenue, preserving private sector competitiveness and also creating fiscal space for households.”
“There's no way the average Ghanaian can save and any country that is not saving is not accumulating any capital, let alone taking advantage of economic opportunities. That country will be open to excessive foreign dominance and ultimately, it will not augur well for redistribution of wealth,” Prof. Bokpin said.
He further argued that Ghana needed a reset and “we need politicians to recognise that the path that we are on now, though it will bring some temporary relief, is dangerous”.
“We are pushing increasingly to the point where the people may not be able to bear it and the situation can explode,” he warned.