Break from past...Budget must show tax reform — Naa Andani
An economist and former banker, Naa Alhassan Andani, has urged the country to table a budget that shows a clean departure from the past to one that brings major reforms in taxation.
He said the country’s tax regime was the biggest challenge because it was too fragmented and put the burden on a few compliant individuals and companies.
“The tax environment has been our biggest problem.
The biggest taxpayers are tired and confused and really at the mercy of tax authorities,” he stated in an interview with the Daily Graphic as he shared his thoughts on what could make a good budget.
He stressed that the tax regime should be simplified with measures to increase compliance.
Naa Andani, who is a consultant and traditional ruler, recalled that past attempts to resolve challenges the country had faced over the years had rolled on from one tax to the other, a development which had given rise to fragmentation.
The Electronic Transfer Levy (E-Levy), the COVID-19 Levy, the National Health Insurance Levy (NHIL), GETFund Levy, the Value Added Tax (VAT), the Growth and Stabilisation Levy, the Financial Sector Recovery Levy and the Communication Service Tax (CIT) are a few of the fragmented taxes on the country’s laws.
“It is too complicated and we must listen to the private sector and declutter the tax sheet, simplify it, enforce compliance and put severe penalties around those who flout tax payment,” the economist and former Managing Director of Stanbic Bank Ghana stated.
For instance, he pointed to the current phenomenon saying, “Everything has been wedged in, to an extent that aside from corporate taxes, that we have VAT on taxes that are wedged in”.
“This practice is too complicated and this is the time for us to listen to the private sector and declutter the tax sheet, simplify it, enforce compliance and put severe penalties to deter people from evading or avoiding it,” he stated.
Naa Andani, the Pishigu Lana, said “even after we have cluttered and simplified it, there must be severe punishment around those who flout tax payment system”.
The advice comes as the Minister of Finance, Ken Ofori-Atta, prepares to lay the 2024 Budget Statement and Economic Policy of the government to Parliament on Wednesday.
The presentation, which will be done on behalf of the President, will fulfil Article 179 of the 1992 Constitution.
Article 179 (1) states: “The President shall cause to be prepared and laid before Parliament, at least one month before the end of the financial year, estimates of the revenues and expenditure of the Government of Ghana for the following financial year.”
The finance minister is expected to present expected inflows in line with the country’s programme with the International Monetary Fund (IMF), which has endorsed sweeping reforms in revenue mobilisation, expenditure rationalisation and measures to improve tax efficiency.
The government’s programme with the Fund is hinged on the Post-COVID Programme of Economic Growth (PC-PEG) which will receive $3 billion support.
Widening tax net
Painting a picture of how the present tax system has been structured, Naa Andani said “at the moment the tax net is so cluttered to an extent that everybody is using every means to try to interpret it, and the interpretation can lead to non-compliance”.
As to why the country has not been able to successfully widen the tax net as expected, Naa Andani said “we have not been able to widen the tax net because we have been too blinkered on the big ones and not simplified the taxes for the small business owners to also honour their obligation to the state.”
To him, once the taxes were well defined and imposed on companies, no matter their size and strength, they would feel comfortable and comply accordingly.
“Every company wants to pay tax.
So let’s find a module.
One of the easiest modules is to make compliance easy by simplifying the structure and processes,” Naa Andani said.
The former President of the Ghana Association of Bankers further said “we have been very hasty and very erratic with coming up with taxes and sometimes we have been very unprofessional”.
Such decisions were now militating against the country as a competitive international investment environment.
Touching on another thorny challenge in the country’s budget, Naa Andani mentioned how confusing the expenditure lines had become.
“For our expenditure lines, we should be brutally frank by ensuring that we have money to undertake any project we have listed.
In instances where we do not have the money, let’s not rush it,” he stated.
Naa Andani said the era when politicians made sweeping statements not backed by evidence, must give way to realities.
“Let us stop the sweeping statements and ensure that at the end of the day, every line item on the expenditure list is a solid line because there are funds for it,” he said.
Naa Andani urged the government to avoid the election year temptations to overspend and rather rein in expenditure.
He stressed that considering the state in which the economy was, any reckless spending could plunge it into deeper problems and make the already bad situation even worse after the elections.
The minister of finance, last month, promised investors that the government would not overspend because there was an election in the corner next year.