Adnan Adams Mohammed
Ghana’s economy is heading into recession if the new tax policies passed by Parliament have been assented by the President are implemented wholesomely, an economist has warned.
The economic professor, Charles Ackah, believes some of the taxes introduced will end up frustrating businesses and end up frustrating government’s efforts at economic recovery and prolong recession. He is thereby calling on the government to devise strategies to prevent crowding out of the private sector.
President Akuffo-Addo yesterday assented to the new tax laws passed by Parliament recently, thus, the Excise Duty Amendment Bill 2022, the Growth and Sustainability Levy Bill, 2022, the Ghana Revenue Authority Bill 2022, and the Income Tax Amendment Bill 2022. Although government has justified that these new taxes are needed to turn the economy around as they are part of efforts to meet the IMF’s criteria to qualify for a bailout, many stakeholders have argued that expanding the tax net without taking cognisance of working to improve its base will affect negatively most businesses in the country.
“Government must exercise great care in times like this to shape its fiscal policy to be consistent. This will strengthen the economy. I think some of the taxes introduced will end up frustrating businesses and end up frustrating government’s efforts at economic recovery and prolong recession,” Prof. Ackah advised.
“We are not against tax revenue. People are calling for a cut in expenditure and again, I totally disagree because our expenditures are not that high. Rather, there’s wastage and what we must be calling for is efficiency in government expenditure”, he added.
Consequently, the Country Managing Partner of Deloitte Ghana has advised government to be careful about what he describes as creating tax fatigue in the country.
“I think we need to expand the tax base and not just increase the rate. When that is done it will create tax fatigue”, Daniel KwadwoOwusu argued. “We need to expand our tax base by increasing formalisation of our economy through digitalisation.”
Speaking at the launch of the 7th edition of the Ghana CEO Network Summit, MrOwusu entreated government to include various economic activities to rake in more revenue.
Indicating that the current economic and global challenges should push government to find more innovative solutions to addressing economic issues.
“This will help boost internal revenue generation and reduce reliance on external borrowing and funding support”, he added.
He further indicated that the over-reliance on external funding support will be forestalled if successive governments invest borrowed funds from external creditors into various productive sectors of the economy.
He contends that government should desist from channelling borrowed funds to just expenditure, a move he believes is key to boosting internal revenue generation.
“Ensure that borrowed funds are invested in projects that will expand the productive capacity of our economy. This will also boost revenue generation and reduce reliance on external support”.
Presently, Ghana’s tax to Gross Domestic Product hovers around 14%, lower than the sub-Saharan African average of 19%.
Though the economy has expanded over the years, analysts believe there are numerous loopholes within the tax system, whilst government has given too many tax holidays to some foreign firms.
Also, the Association of Ghana Industries (AGI) has said the three revenie bills recently passed by parliament will strangle industrial growth, thus, slow down productivity, which would, in turn, cut down the revenue the government can rake in through taxes.
In a statement signed by its Chief Executive Officer, Mr Seth TwumAkwaboah, the AGI said the three bills will “pose very dire consequences for Industry.”
“We denounce the lack of stakeholder consultation on such fiscal policies, which have negative impact on businesses”, the AGI noted.
Although the association made input to the bills, but it shared that, it is obvious their submissions did not receive the consideration as expected.
Contrary to government’s ambitious revenue projection which largely hinges on the performance of Industry, captains of businesses foresee a contraction in manufacturing and other related business activities.
They believe businesses may have no option but to cut down on expenditure and production levels to stay within budget”, the association warned.
“With the foregoing, government risks missing its revenue target if industry has to contend with these new taxes.
“While we reckon that the government needs revenue, fiscal prudence is crucial”, the association added in the statement.
“We appreciate the urgent need of the IMF measures, but this should not be at the expense of growth in our industrial sector.”
“We call on the government to engage AGI on measures to incentivise our local industries to forestall the negative consequences of these policies”.
The group of business owners related that, they are ready to dialogue with Government for a better way out to save jobs while ensuring business growth which have direct impact on GDP growth, in other words, economic expansion of the country.
“To this end, we welcome the opportunity to dialogue with Government on how to save jobs and the strategic options to explore in cushioning our local industries.”
Also, to register its dismay against the unanimous approval of the tax bills into law by Parliamentarians is the Transport Forum Ghana. It bemoaned the posture of the current crop of young parliamentarians.
Vice-President of the Forum, Mr Eric AmoahAmponsah, in an interview last week, said “we had a lot of hope. We, as youth; we, had a lot of anticipation that they would push our cause.
“But take it from me, the majority of them have gone and [are] pushing agendas based on party lines, not the community that voted for them. The ideas they push, the thoughts they have, it has become based on party lines.”
He indicated that there were no consultations done by these young parliamentarians with the constituents concerning the bills to find out how it would affect their lives but rather, they put their party lines first and gave their approval.
“These new taxes that have been passed, how many parliamentarians went back to their constituencies to check [with them that] ‘This is what government is proposing. What do you think?’ to consult traders.
Parliament, fortnight ago, after fierce resistance by Minority MPs who narrowly lost the vote to approve the bills by 136 to 137, passed the Excise Duty Amendment Bill 2022, the Growth and Sustainability Levy Bill, 2022, the Ghana Revenue Authority Bill 2022, and the Income Tax Amendment Bill 2022 by Parliament.
According to the Finance Ministry, the three bills are expected to individually rake in the following;
Income Tax Amendment Bill 2022 will bring in GH¢1.2 billion annually, Excise Duty Amendment Bill 2022 GH¢400 million annually and Growth and Sustainability Amendment Bill 2022 GH¢2.2 billion annually.
