Finance Minister announces review of tax system in 2020

The Finance Minister Ken Ofori-Atta has announced government’s plans to review the country’s current tax system in 2020. The intention of Government in its revenue mobilization will be to institute more private sector led interventions in the tax system.

The comments were made with regards to The Ghana Revenue Authority’s inability to meet its revenue mobilization targets over the past four years.

It is however not a surprise that GRA’s revenue targets have not been met. In a post-budget debate in 2018, Institute of Fiscal Studies (IFS) hinted that the projected budget amount for 2019 was over-optimistic. The recommendations were for the government to amend the exemptions bill which had too many provisions. Drawing from President’s state of the nation’s address in February 2019, the President stated that In the last eight years, tax exemptions in respect of import duty, import VAT, import NHIL and domestic VAT have grown from GH¢392 million (0.6% of GDP) in 2010 to GH¢4.66 billion (1.6% of GDP) in 2018.

In the wake of government seeking to raise GHS 58.9 in revenue, it was considered too optimistic. Again, the economic think tank has described the targets as over-optimistic which could escalate even with the exit from the IMF program.

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U-turns & Uncertainties

In another breath, there has been a caution for to stabilise the tax regime. U-turns and uncertainties associated with the tax system gives investors a rather hazy impression of the country. This is particularly in reference to luxury tax that was introduced and then repealed. Also the botched implementation of the newly increased CST tax.

These may all be symptoms of incremental approach towards shaping the tax systems.

However this time the Minister of Finance has indicated a holistic approach to reviewing the entire tax system. Inorder to introduce more private sector-led solutions in the revenue mobilisation. The 2020 budget is expected to contain the ‘tax review’ statement and give an idea the outcomes.

Expectations of The Review

Obviously one of the expectations of the review is how the tax net would be widened to cover the informal sector. A chunk of very profitable businesses operate in the informal sector, seemingly off the current taxes radar of the GRA. In the post review era, we expect to see all profit oriented businesses in the informal sector raked into the tax net.

Additionally the review system must reduce tax default rate to the barest minimum. Miklin Hotel and Pasico Ghana Limited, all renowned institutions are among the few who faced the brunt of GRA’s tax enforcement unit recently, due to years of tax evasion. How such notable institutions could successively evade tax obligations for years beats imagination. Going forward, we expect a more robust tax system that seals tax evasion loopholes.

Another expectation is to amend the exemptions bill as recommended by the IFS

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Henry Cobblah

Henry Cobblah is a Tech Developer, Entrepreneur, and a Journalist. With over 15 Years of experience in the digital media industry, he writes for over 7 media agencies and shows up for TV and Radio discussions on Technology, Sports and Startup Discussions.

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