Parliament last Friday passed the Tax Exemptions Bill, 2022 to provide for a tax exemption regime in the country.
The bill, which sets clear eligibility criteria for tax exemptions, also provides for the monitoring, evaluation and enforcement of exemptions.
Further, it will create a more robust regulatory regime for monitoring to ensure that exemptions granted are used for the intended purposes, as well as control the abuse of the existing exemption regime.
Ghana has struggled with high inflation and a weakening currency since January, as the prices of food items, fuel and basic needs continue to skyrocket.
Inflation rose to nearly 30 per cent in June — the highest in 19 years.
For us, the country will continue to plunge into a situation of unsustainable debt if innovative approaches towards mobilising domestic revenue are not adopted.
The government is seeking between $1.5 and $3 billion from the IMF to shore up the country’s finances and win back access to the global capital market for the country to balance its nearly $1 billion deficit.
In contrast to the rapid growth in expenditure, tax revenue in Ghana has remained very low as a share of GDP over the years due to the tax-expenditure regime, including a wide range of exemptions and various forms of preferential tax treatment, concessions and low compliance.
The continuous rise in tax exemptions impacts negatively on how much the government mobilises as revenue for the state.
Many analysts have called for an overhaul of the country’s tax exemption regime in order to tackle the revenue leakages lost through corruption and under-reporting to guarantee the effective mobilisation of domestic taxes.
In 2018, tax exemptions amounted to $1.1bn, about 1.6 per cent of GDP, according to President Akufo-Addo in his 2019 State of the Nation Address.
The 2020 Auditor-General’s report also revealed that GH¢12bn was lost to revenue leakages, an amount significant to the Ghanaian economy.
Article 174 of the 1992 Constitution provides that only Parliament can approve a waiver of taxes.
The tax laws provide that exemptions that do not follow constitutional prescriptions are invalid.
Section 7(5) of the Income Tax Act, 2015 (Act 896) makes it clear that no law or agreement can exempt income tax unless the legal framework for exemptions is followed.
For a country that badly needs revenue to fix its debt-to-GDP ratio, Ghana grants too many tax exemptions.
We can understand why it was important for the country to grant tax exemptions — to attract more foreign investors into the country — but evidence suggests that too many tax exemptions have failed to provide the desired results.
We are, therefore, glad that Parliament has finally passed the Tax Exemptions Bill, 2022, which had been before the Legislature since 2018, to set clear eligibility criteria for tax exemptions.
The Daily Graphic suggests that in addition to raising revenue, the government must also plug all loopholes and ensure the prudent management of public finances.
The Auditor-General’s Department and the Public Accounts Committee of Parliament, which usually identify financial irregularities in their reports, must be strengthened and encouraged to issue surcharges without fear or favour.
The recent Auditor-General’s report identified about $1.8 billion worth of irregularities in public finances, and this must be a pointer that when these irregularities are checked and properly dealt with, the government will gain the confidence and support of the citizens.
We believe that the passage of the bill bodes well for the revenue mobilisation drive of the government and will improve our fiscal situation.