- "The biggest threat to our revenue mobilisation is tax exemption. In less than 15 years … Ghana has given away about half of its revenue base through exemptions, for me it is the biggest leak in our economic structures."
Prof Godfred Bokpin, an economist with the University of Ghana Business School has said delays on the part of the government in passing the tax exemption bill into law is creating a major leak in the country’s revenue generation.
According to the Institute of Economic Affairs (IEA), Ghana loses over GHC 5 billion every year through tax exemptions alone.
Speaking on The Asaase Breakfast Show with Kwaku Nhyira-Addo on Monday (7 February) on the impact of ratings and downgrade of Ghana’s economy, Bokpin urged the government to fast-track the passage of the bill to reverse the trend.
“The biggest threat to our revenue mobilisation is tax exemption. In less than 15 years … Ghana has given away about half of its revenue base through exemptions, for me it is the biggest leak in our economic structures,” he pointed out.
“The E-Levy is unfair and regressive, especially when we look at how little exemptions are therein for Ghanaians with the existing tax nets. If we are able to ensure their proper implementation then we will not need the E-Levy,” Bokpin said.
Ghana’s biggest problem
Pierre Frank Laporte, the World Bank country director, has said one of Ghana’s biggest problems is offering too many tax exemptions.
According to him, the only way the country can fix its debt to GDP ratio is not just by cutting expenditure, but by increasing revenue.
He told Joy News that, Ghana would first have to shirk some of its tax practices, particularly tax exemptions while increasing efficiency in tax collection.
He explained that the tax exemptions are for instance to attract more foreign investors into the country, but the empirical evidence has proven that too many tax exemptions have failed to provide the desired results.
“So, you talked about efficiency, that’s one thing, to make sure that everybody pays what they should be paying. That for instance if you look at exemptions in Ghana it’s a big problem. There are too many exemptions.
“And this is a conversation we’re having with the Ministry of Finance. Very often countries think you can give so much incentives, so much concessions, and exemptions to attract investors. But there are other ways that this can be done,” Laporte said.
He added, “Empirical evidence has shown that these incentives excessively, in the long run, don’t work.
“VAT exemptions are given to many big investors to facilitate their entry and to launch their activities. But in many countries, either you have a quick VAT refund, it’s like the investor pays his VAT and you process his refund in one month or two.
Fred Dzakpata
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