Spio-Garbrah speaks on E-Levy: Recalls experiences with the introduction of VAT
The government is looking at raising internal revenue because it is expensive borrowing from the international market. This has brought in its wake the introduction of the E-Levy, which in itself has engendered mixed reactions from the political divide. The Graphic Business Assistant Editor, Mr Charles Benoni Okine (CBO), recently caught up with the former Minister of Communications and a former Minister of Trade and Industry in Ghana, Dr Ekwow Spio-Garbrah (ESG), who shared his experiences and thoughts on the E-Levy among other issues of national concern.
Below are excerpts of the interview.
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Charles Benoni Okine (CBO): Doc, We haven't heard from you for a long while. What have you been doing sir?
Ekwow Spio-Garbrah (ESG): Well, I'm currently playing a very different role in the Pan-African continental basis. Currently with a UK-based global company called Eco Capacity Exchange, as the President for the African region of the organisation and also the Managing Director globally. Therefore, that has taken a lot of my time, attention and focus.
In my day-to-day activities, my mind has been on my work with clients and my organisation in terms of their business planning, countries in Africa that they want us to operate in. Of course I listen to news, I monitor a number of developments, I'm on various WhatsApp platforms and I see what is going on but I'm not really commenting on them at this time.
CBO: That is very interesting. But this takes me to some emerging developments, especially in our Parliament - the Eighth Parliament. Can you please share your thoughts on what must and can be done to get things better?
ESG: Absolutely. Well, I wrote an article to the Daily Graphic in early January, when it became obvious that we were having a bifurcated parliament, two sided parliament of 137 - 137, and I could forecast that if we didn't take certain measures as a country, as a people, then we would end up in strange relationships and strange developments.
And I wasn't trying to be a prophet of any kind, but I think the evidence that we've experienced over the last one year showed things could have been managed a lot better. Of course, we have a parliament that has a minority personality as a speaker of the Parliament, which with the 137-137, there is no obvious majority even though they have defined their own majority and minority in their own ways and in terms of voting capacity so you find the situations which I don't think was intended where a person can be in the chair as a Speaker or an acting Speaker and when it comes to voting, they can resign or temporarily cede the chair to another personality who then comes to sit in the chair so this first person can vote. I don't think that was ever contemplated at the time our Constitution was being written.
That is just one of the quirks of what is happening and so I'm de-personalising it so that we don't deal with personalities but we deal with the issues. And the issue at hand is that, this kind of turbulence which we saw in the first year, if we don't take active decisions and actions to cure it and we allow it to metamorphose and even move into the second year of this government, I can forecast and foresee what the final outcome will be.
CBO: At the moment, the government is looking at raising internal revenue because its expensive borrowing from the international market. As a finance expert, are you in a position to offer any strategy?
ESG: Well, I'm not in the government to suggest a strategy that should be adopted but I noted that a certain institution that studies the Ghanaian economy has put out articles on how much our natural resource revenues are bringing us as a country and determined that Ghana gets only about 17 per cent of its oil and gas revenues and their opinion is simply the negotiation by Ghana over some of the agreements we sign with our foreign partners, maybe where some of those resources that have been locked up and locked out, which are not available to us, may reside.
There are pockets of revenue which people talk about and debate on in Ghana. There may be numerous other items that the Ministry of Finance would have been looking at periodically but in tax policy implementation, it is quite often that maybe government as a whole, often looks for a tax that they feel is easy either to mobilise or account for and easy to pay, whether it is painful to pay or not.
CBO: Having talked about Parliament and what is happening, one of the main burning points now has to do with the E-Levy, what perceptions do you have about it?
ESG: the E-Levy has interesting dimensions and I can speak from it in a circumferential manner, looking at all the angles of the issue.
One angle is financial aspect. The government needs tax revenues, that is, taxation. Another aspect is that the tax is on the telecommunications sector. These are subjects that I have some interest and familiarity with, having worked in the communications sector in Ghana and globally in the Commonwealth.
It also reminds me of Ghana's own history which is when in 1995, President Rawlings and the government of the time wanted to enact the Value Added Tax law, that was the introduction of a new tax policy and a new tax regime into Ghana, and the interesting facts are that, the current President, who was then in opposition, led some demonstrations in Ghana. There were three of them that were also famously branded, “Ku me preko”, “sie me preko”, “Wie me preko”. The effects are what I want to talk about and not the demonstrations themselves.
The President of the time, President Rawlings, seeing what was going on, decided to suspend the whole VAT process so in May 1995, when the demonstrations took place, I was Ambassador to the United States. When I became minister of Communications in 1997, the first thing he told me was that, in that ministry, what he wanted me to do was to educate the general public to understand why the VAT was actually a good tax proposal and not the negative ideas that were being propagated by those who opposed it.
So that became my first goal, among many goals, within the Ministry of Communications after studying the problem, from the professional point of view, that's on recounting what another President did given similar conditions. So I had to study it from a technical point of view and I did that by creating a committee of about 20 communications professionals and we went through a process of analysing the issues, understanding the pros and cons of the tax regime, analysing the stakeholders.
You do a stakeholder mapping, map all your stakeholders, the groups in favour and the groups against, what they were saying at the time that the policy was being implemented and suspended, you then move to the next stage in your diagnostic assessment, go to the field and test some of the stakeholder opinions, find out what their position was then and what it is now, because you are trying to bring the VAT back, the financial institutions, banks, what should we do about it for it to work this time.
You talk to political parties as well, talk to all stakeholders, down to market women, traders, everyone who is likely to pay that VAT. You talk to your international community stakeholders, World Bank, IMF and other investors, then you get a very clear picture of those who are likely to support it if it came back, those who may still oppose it, those who need to be persuaded about one thing or the other because they didn't understand it really properly. People, for example, talked about something called cascading, which I keep hearing even about this current levy, whether it’s true or not, I'm not here to judge it at this point.
Cascading was an issue during that time, which turned out to be wrong but the VAT structure is very different from the E-Levy in terms of how it is applied, because we have input and output tax and you are able to deduct from your output, the input taxes that you put in so there was no cascading. But then we understood the challenges for that particular tax regime and we then had to put in place public education strategy and action plans to move from community to community, sector by sector, based on the stakeholder mapping, to start changing opinions. So it took 18 months.
One of the most interesting and critical issues in public communication, that people underestimate almost always government, even in a cabinet meeting no communications professional would just assume, let's have a press conference on this matter and let's share some materials to journalist and they would understand and let's pass the bill. It won't happen that way and I can see that also happening now, where the ruling government thinks that the bill can be passed.
I'm sure it can be passed if it’s a matter of numbers, if it’s a matter of just pushing your way through. But whether when you are passing the bill and you want people to cooperate with you. I heard one of the ministers say that about 24 per cent of Ghanaians, according to a certain research they have done, may not cooperate, at least initially and may withhold the payments by moving to cash and cheques rather than MoMo, for example. So I guess the government itself is doing a research on that subject. The point I was trying to make was that the time it takes to convince somebody who has taken an entrenched position, wrongfully, in any social intervention, you cannot convince the person in just one conversation, it will take time. This is the challenge that I think any government faces.
CBO: What is your perception about E- Levy?
ESG: Any sector that is growing is attractive to government to get money from. I believe that any government should try and get their fair share of the sector.
But how do you do it? If the government speaks to the telecommunication companies telling them, we need six billion Ghana cedis from your sector, and ask them how they should go about it. I'm sure the companies would present a very feasible paper, which makes me wonder the extent to which government is interacting or not interacting with them.
Let me give you another example. When I was a minister for a short period in the Ministry of Mines and Energy, I had dinner with two Australian businessmen and in the dinner I was asking them about how they saw the Ghanaian Gold Mining investment sector and they said one of the things they didn't understand was why we were asking them, the Australians, to keep as much (I think it was 70 per cent of their revenues) off shore and then to use it to buy their supplies and raw materials and what we had and well I said if that was the policy of the government, I haven't been here long enough to know this fact but I asked them how much they thought would be a fair percentage and they said 25 or 30 per cent.
The foreign investors were telling us that our laws were too loose and too relaxed and they would have been happy to pay 25 or 30 per cent which may be prevailing in other African countries, so the good thing about international organisations where I worked at the African Development Bank , United Nations, World Bank etc. is that they have global data, averages and statistics and of course now that Google is available for everybody you can just google any subject you want and say average levy of African telecom tax in the world and they will give you a whole map and you can see where the averages are and you can determine if your levy is above or below the global average and then the African average.
IFS has told all Ghanaians that at least in the case of gold mining or natural resource extraction, especially oil-related, that we seem to be much lower than some comparator countries so in terms of where we can get our resources to balance our budget there are numerous options and it's up to government to choose whichever one that it deems to be the best for the country.
DG: Doc supposing you were the President and your finance minister tabled the E Levy and it had engendered all these brouhaha, what advice would you offer?
ESG: You are asking me an impossible question. Why because the President himself if things are working normally is the chairman of cabinet meetings at which the decisions you are talking about are taken so he cannot be ignorant of decisions and whether he actually supported them or did not support them well actually.
It is not possible for the President to be at the meeting where he opposes something and the thing is approved, it’s impossible. The cabinet is only an advisory body to the President. The President doesn't have to accept anything, 10 per cent of anything that goes on in the Cabinet, he can ignore it and it is the President's executive power so he can just sign and approve anything by executive authority without any Cabinet meeting but when it comes to Parliament then you have a certain debate or one or the other then we decide whether to approve it.
But should a President, not necessarily this President, when they see sufficient mobilisation against any policy which may make it difficult to implement because it is one thing to pass the policy or implement it.
I'm saying to you it has also come at a very difficult time for the economy as a whole when your investment community and your other international banks give you signal that they are having difficulty supporting your economy and it would have to come to a meeting or cabinet meeting between a minister and a President to look at the numbers closely they will guide themselves and the fact that the
budget as a whole which if you take the e-levy out is 6 something billion which the government is to get from the e- levy or so unless you're talking to that government officials and you can discuss with them what the alternative measures that you can adopt are, it may not come from the E-levy mobility or moderate your demands so like NDC did in 1995 so you drop the VAT from 17.5 per cent to 10 per cent just for you to get to all those options and percentages to play with and other sources of funding
CBO: Do you think government should put on hold the E Levy for now and continue with engagements?
ESG: I would say so, because there are many dimensions of this. First of all, even if it is coming back, should it come back at 1.75 or should it come back at some other lower figure.
Again, I can only recite my experience when the VAT was coming back. First it had been proposed by Dr Botwe's administration as Finance Minister, as 17.5 per cent. After 18 months of public education, we agreed that a lower tax would be more acceptable to Ghanaians so we brought it back at 10 per cent. We have to keep history alive because it is passed up based on our own experiences, we shouldn't be repeating mistakes which are avoidable if we can.
CBO: So from what you’re saying, the per cent tax on the E Levy should be reduced?
ESG: That is not for me to say. I just want you to understand that anybody who wants to do an analysis can go to the Internet and check for the Telecom tax related and electronic and tell whether we are in the middle, below or above any quarters and it is one of the things or indicators that will tell whether what you are doing or not and so I can't tell but I can tell you how to get the information which I think the government ought to get this information
CBO: Do you see the brouhaha as a failure in mass education on the E Levy?
ESG: Well I'm concerned about the threat of social disorder and I made that concern as far back as January last year in the Daily Graphic and I shared publicly what those concerns were and I did not foresee the fight among educated representatives, well-dressed people who are eating from nice homes and come in very fancy cars, most of them are in four wheel drives so if we think from the psychological point of view that if parliament could sink that low that they had to apologise for the one day's activity and i am telling you the profile of an average Parliamentarian so seriously what do you think those in the street selling dog chains and those who make GH¢10 to GH¢5 income a day are going to do if they also have the chance to express their views and you know Rawlings is highly sensitive, someone who could feel the pulse of the Nation in his own way.
According to some of his colleagues, I wasn't always there all the time but those that had been close to him in the PNDC era who claimed he survived more than 50 attempted coups of course attempted may depend on different stages of attempt but however you need the national security people who can identify national security threats; some got to a place that this is identified as a threat and possible coup that is why I'm sitting here talking about how we can avoid those threats that go beyond a certain threshold and I am not a security expert or a security analyst and I’m not seeing or reading what they are reading in the media but I'm only seeing and hearing all what we are all saying and hearing and just because I have had some exposure internationally and locally, etc I am also in my own small way sounding some signals for cooler heads to prevail and for government to take certain measures that are outlined in the article. I referred you to a lot more one year ago and I am saying you have 137 people on your side in a football match and 137 people against you in the same football match you can see that you're starting from a draw position.
So instead of having a football players fighting in the pitch with every tackle which is what they are likely to do because there's pressure on all sides we have to find other mechanisms to open up and loosen intentions and to welcome other parties to various discussions and I have seen articles in the newspapers and others I won’t mention the personalities that have offered themselves to be available for conversations, and when I view discussion programmes, both political parties major political policy this very last week on Ghana television so you can see that the tensions are not of a nature that can run away by themselves.
We have the peace council, we have all kinds of other stakeholder bodies and we do not necessarily see or read what they are doing but they're working behind the scenes, but I'm really hoping that's all the usual peace-loving stakeholder type of people - the chiefs of our country, council of state and their peace council type, pastors, ministers will really ramp up on their interventional skills. We are not in a good place and the cost of living is becoming very challenging and they're all complaining.
CBO: Doc you once aspired to become the Presidential candidate of the NDC. What is your position now?
ESG: This is totally unrelated to today's discussion. I don’t think these developments by themselves should want me or anybody else to aspire to be in any position. It’s not about campaign for me or anybody else. It is not for NDC or NPP, it’s about Ghana. How do we as Ghanaians solve problems in a peaceful manner and I'm saying currently we have a levy that is contentious to us. I think you agree that it is contentious that some people want it and some people do not want it and according to another news organisation, I will not mention the name but probably they claim to be the largest or most watched TV network in Ghana; they claim that 90 per cent Ghanaians according to their survey are opposed to the e-levy. That's a news organisation. I'm not saying according to a well-known news organisation.
And I'll be surprised if any of the news organisations including Graphic where you also have your vox pop and all kinds of mechanisms will say that less than 50 per cent of Ghanaians are in favour of it. I will be surprised or not only because all tax experts say nobody likes to be taxed. If it is true that nobody likes to be coerced, then it means that tax measures when they are coming, need to be properly oiled and people must be encouraged about it and I'm telling you that it takes time. I'm talking about pure technicality. You cannot convince people about things they find painful to do.
