Ghana loses over GH¢5 billion annually through tax exemptions – IEA

Ghana loses over GH¢5 billion every year through tax exemptions, a reason the Institute of Economic Affairs wants the government to pass the tax exemption bill immediately to plug a big hole in the tax system

Already, tax consultants and attorney, Ali-Nakyea and Associates, is urging the government to take a second look at the tax exemptions regime, if it is to rake in more revenue for the state.

The government enacted the bill to streamline the exemptions, but it has been languishing in Parliament since 2019.

The IEA is urging Parliament to pass the bill with urgency to narrow the huge gap in the tax system.

Director of Research at IEA, Dr. John Kwakye speaking at IEA’s review of the 2021 Budget, said “the political will to pass the bill seems to be lacking. We [IEA] urge Parliament to pass the bill with urgency, to plug a big hole in the tax system.”

The informal sector accounts for nearly 30% of GDP, but a large part remains outside the tax net.

Dr. John Kwakye said, “We should be taxing businesses that employ at least a few people, like the mechanics, hairdressers, tailors, and other artisans, and instead, leave out the small businesses like ‘kayayoos’, ‘kenkey’, ‘waakye’ and ‘ice-water sellers who have tiny incomes.”

He said Ghana’s tax rate is high but the nation is not accruing enough revenue because of the low efforts in mobilizing tax revenue.

“We all know that Ghana’s personal income, corporate income, and indirect tax rates are relatively high.  Our low revenue effort is not due to the fact that our tax rates are low but it’s rather due to the fact that the government fails to collect a lot of taxes”.

“Ghana has chronically struggled to mobilize enough revenue to fund its expenditure requirements. In the process, we have had to borrow supplementary funds and this has escalated our debt burden. This situation has to change”, Dr. Kwakye emphasized.

Ghana’s tax revenue to GDP very low compared to Sub Saharan Africa average

Ghana’s tax revenue to Gross Domestic Product was 11.5% in 2020 and is estimated to reach 13.24% in 2024. Yet the average tax revenue to GDP for middle-income countries is over 25%.

Ghana’s total revenue to GDP was also14.3% in 2020 and is expected to rise to 16.9% in 2024.

The average total revenue/GDP for middle-income countries is about 30%. This means that we also fall short here.

** The Thunder Gh News | News In Flash!
Follow us on Twitter: @TheThunderGh 

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button