Kwaku Kwarteng, the chairman of the finance committee in Parliament, has said that the House will pass the much-awaited Tax Exemptions Bill in July.
The bill, which was withdrawn from Parliament last week, is expected to make its way back to the House this week after some revisions, according to Kwarteng.
Speaking to Asaase News, the Obuasi West MP refuted claims suggesting that the passage of the bill will hurt investor confidence.
āInvestors just want stability in our tax regime. I donāt think a lack of exemptions will hurt investor confidence in our economy,ā he said.
āThe Tax Exemptions Bill is not really too keen to grant exemptions as a way of promoting local content. We can use other instruments to do that if we want to,ā Kwarteng said.
āGenerally, the principle is that, whenever we can stop the exemptions, we do. Iām just waiting for it to be passed into law then the proper education will start.ā
He said the government will roll out a series of public education messages after the passage of the bill into law.
āWhat we have tried to discourage is use tax exemptions to promote local content. Once the Tax Exemptions Bill is passed, thereāll be a lot of education,ā Kwarteng said.
High tax exemptions hurting Ghanaās economy
Professor Godfred Bokpin, an economist with theĀ University of Ghana Business School, has said delays by the government in passing the Tax Exemptions Bill into law are causing major leaks from the countryās revenue generation.
According to theĀ Institute of Economic Affairs (IEA), Ghana loses over GHC5 billion every year through tax exemptions alone.
Speaking onĀ The Asaase Breakfast Show with Kwaku Nhyira-Addo on 7 February 2022 about the impact of ratings downgrades of Ghanaās economy, Bokpin urged the government to fast-track the passage of the bill to reverse the trend.
āThe biggest threat to our revenue mobilisation is tax exemption. In less than 15 years ā¦ Ghana has given away about half of its revenue base through exemptions. For me, it is the biggest leak in our economic structures,ā he said.
āThe 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,ā Bokpin said.
Ghanaās biggest problem
Pierre Frank Laporte, theĀ World Bank country director, has also said one of Ghanaās biggest problems is offering too many tax exemptions.
According to him, the only way Ghana can fix its debt-to-GDP ratioĀ is not just by cutting expenditure, but by increasing revenue.
Laporte told Joy News that Ghana would first have to abandon some of its practices, particularly tax exemptions, while increasing efficiency in tax collection.
He explained that the tax exemptions are intended, for instance, to attract foreign investors into the economy, but the empirical evidence proves that too many tax exemptions have failed to provide the desired results.
āSo, you talked about efficiency. Thatās one thing: to make sure that everybody pays what they should be paying. … For instance, if you look at exemptions in Ghana itās a big problem. There are too many exemptions.
āAnd this is a conversation weāre 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,ā Laporte said.
He added, āEmpirical evidence has shown that these incentives excessively, in the long run, donāt work.
āVAT exemptions are given to many big investors to facilitate their entry and to launch their activities. But in many countries … you have a quick VAT refund, itās like the investor pays his VAT and you process his refund in one month or two.ā
Fred Dzakpata
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