Adnan Adams Mohammed
As the debate on the proposed new tax bills rages on, continuing from part one of this article, the opposition to the new tax bills is by day getting stiffer.
The Ghana Upstream Petroleum Chamber has also warned that, the proposed Growth and Sustainability Levy by government could trigger litigation through the international court as it breaches provisions in the petroleum agreements.
According to the Chamber, it is worried that the government is bent on going ahead to breach these provisions to raise money from what it describes as “creeping taxation”.
In a statement issued by the Ghana Upstream Petroleum Chamber, last week, asked government to reconsider the introduction of the growth and sustainability levy, especially at a time the country is struggling to attract new investments in oil and gas exploration.
The Chamber added that “the industry considers this levy as the latest in a series of crippling taxation that is affecting the economic balance of petroleum agreements.”
Some of these taxes include, “ the COVID-19 Recovery Levy, Ghana Education Trust Fund Levy, National Insurance Levy, the 1% Local Content Fund Levy and several others,” the Chamber disclosed.
It added that “this new tax disregards the importance of the preservation of contract sanctity to the promotion of new investment.”
The Chamber was also worried that “unpredictability of the fiscal terms of our petroleum agreements will discourage new oil and gas investment at a time when financial institutions are curtailing investment in fossil fuels.”
The better way out
In considering some alternative decisions and policies that government should be focusing on instead of the cheap way of introducing and reviewing tax policies frequently, hurting the already overburdened tax-compliant individuals and companies, the experts provided a better way out.
Doubling effort on digitisation of the economy
Professor Ebo Turkson urged government to ramp up its digitalization drive to put all the tax and invoice requirement on a single government platform to ease business at the ports.
He emphasised that, “For instance, the number of government agencies for instance at the ports that are collecting revenue for government, can we reduce the number of them and still getting more of these revenue. Because you see, the more you put in place some of these institutions and these taxes, the easier it is for people to evade those taxes for convenience. So let the process be so straightforward so that tax payers will comply easily so that it doesn’t waste their time,” he said.
Reversing tax incentives and tackling IFFs
In his suggestion, Dr Ali Nakyea wants government to reverse some tax incentives and block illicit flows of cash from the public purse.
“You are granting incentives to certain sectors that they shouldn’t pay tax, is it time to ask them to come and help you contribute? If it is the 25 they cannot pay, can you bring in 5%, 10%? That is one area.
“The second one is trying to look at what we refer to as illicit financial flows that is complete non-disclosure. If you take the Ghana Integrity Initiative and CHRAJ reports, it will tell you that Ghana is losing US$3 billion dollars annually from corruption. Is that not exactly the amount we’re looking from IMF.
“If you take ACEP report, it tells you we’re losing US$2 billion from illegal mining. If you add the two, we’re at US$5 billion. We’ve not come to under invoicing and other things at the port. So do you need IMF/ we’re talking about $5 billion a year now, and you’re going to get US$1 billion a year from IMF,” he said.
Dr. Ali Nakyea called on the government to close the tax gap and rope in much of the informal sector and suggested that, the second schedule to the Income Tax Act 2015 (Act 896) be implemented.
“Because it brings up the idea that why can’t we allow the informal sector to give say the 2% 3% of their turnover like the growth and stablization levy is saying and that is your total tax for VAT and income tax at least you are also contributing something then we could have opened the net, we would have widened the net,” he said.
Cutting government expenditure
Additionally, Dr. Ali Nakyea suggested that, instead of increasing taxes, the government should have instead explored avenues for drastically reducing their expenditure.
He said the government could have started with postponing some non-urgent projects to provide the much needed fiscal space for government maneuvering.
“If your income is to meet expenditure, are there no expenditures that may be postponed or suspended to give you enough room to maneuver when things are [hard] – you can’t continue. Indeed, most of the calls that are being made are not on cancellation entirely of some of the projects, people are even asking, can you suspend some of them that are not so immediate and pressing and when things normalise we come back to it. I don’t think that is asking too much,” he said.
He added that the government could have also explored ways to close the country’s widening tax gap instead of increasing taxes.
“For me it’s that are we efficient and effective in the collection of the existing taxes? Because we studies by Opoku and Tanaka in 2020 showing us what we call the tax gap, the difference between the actual taxes we collect and the potential we can collect. How have we closed that gap?
“Because the more taxes we introduce, the wider the gap will be if compliance is that low or non-existent. So I believe if we’re able to mop up excessively what exists and we’re not able to achieve then we can start thinking about is it that we don’t have enough? We have more than enough taxes. The …tax we have are competitive in the sub-region, and so why are you increasing it?” he said.
Tax education
Prof Turkson Ebo proposed enough public tax education to promote a tax compliant attitude in Ghanaians.
According to him, promoting a tax compliant attitude would support the government’s tax revenue mobilisation agenda rather than the introduction of new tax measures. He explained that increasing taxes without increasing tax compliance amongst Ghanaians would be counterproductive and potentially injurious to the growth of the private sector.
“One way the government could encourage Ghanaians to be tax-compliant was to show the citizenry that the government was making good use of their taxes.
“We need to ensure that there is enough public tax education and also we should show the public sector, the government machinery must show the average Ghanaian that we’re making good use of your money to support the public sector to create jobs for your kids or the young men and women of this country to get into jobs.
“When you do that and people see that the revenue that you get from the taxes are plowed back into the economy to help them, people will be willing to pay taxes. Businesses will be willing to pay more taxes, if for instance you discuss with them and increase their after profit tax by a little bit,” he said.
