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Review tax policies to generate more revenue - ISODEC Policy analyst urges govt

BY: Ama Amankwah Baafi
Bernard Anaba
Bernard Anaba

A Policy Analyst at the Integrated Social Development Centre (ISODEC), civil society organisation, Mr Bernard Anaba, has called for a review of existing tax policies to see which ones can lead to achieving revenue targets.

He made the call in an interview with the GRAPHIC BUSINESS in Accra, following hints by the Minister of Finance, Mr Ken Ofori-Atta, of a possible introduction of new tax policy measures in the mid-year budget review, as part of efforts to ensure sustained funding for its key programmes.

“If the abolition of some taxes on financial transaction (nuisance taxes), for example is seen to be inimical to achieving targets, government may decide to re-impose that tax upon review,” he said.

Mr Ofori Atta’s hint comes at a time when domestic revenue mobilisation has become a challenge, despite the numerous efforts by the Ghana Revenue Authority (GRA) to rope in more people into the tax net.

Only 1.2 million people out of the 28 million citizens pay taxes. Out of this number, about one million are in the formal sector, leaving only 200,000 in the formal sector.

Widening the tax net


Mr Anaba said this could be done by plugging existing loopholes by tackling tax evasion such as the recent operation by the Ghana Revenue Authority (GRA) on the evasion of vehicle duties.

“We can reduce the amount of corporate incentives not yielding any benefit. We can actively encourage the self-employed to be more consistent in their tax obligations,” he said.

This means having systems that adequately capture all potential tax payers; rent taxes and property rates in adequately collected.

The Tax Identification System (TIN)

He commended the GRA effort at enforcing the TIN policy.

He said there was the need to plan the implementation together with other allied state agencies such as the Driver and Vehicle Licensing Authority (DVLA).

Recommendations

According to him, although the highest marginal rate for income tax was 25 per cent and the minimum was five per cent, there are people currently earning close to 10,000 monthly and so fall outside the bracket but pays the same amount.

“The tax bracket is so narrow and taxes low income earners more than high income earners. We should be able to revise our tax bands looking at incomes. It could have other rates for high earners. The rich must pay more,” he said.

A World Bank review, 2017 of Ghana’s fiscal policy states that tax incentives by the government is about five per cent or more of Gross Domestic Product (GDP).

Mr Anaba said the figure was huge and the government must consider revising it.

Effect of tax evasion

A recent study by ISODEC into tax evasion revealed that Ghana loses close to US$2.1 billion annually to tax evasion by corporate groups, individuals, multinationals and organisations operating in the country.

It further revealed that such entities either avoided tax or engaged in illicit trade which affected the tax net, thereby running down the national kitty.

GRA action

It has launched a national tax campaign aimed at creating awareness among Ghanaians about their civic responsibilities to contribute to the national purse. — GB