Tax expert and lead partner at PFM Tax Africa, Seth Terkper, has described tax reliefs provided by government in the 2021 Budget Statement as ‘sweeteners’ to help Ghanaians ‘swallow the bitter pills’ of increased levies.
According to the former Finance Minister, the 2021 Budget Statement is a mixture of new or enhanced tax measures with associated tax reliefs.
“In the 2021 budget you see a tax measure and a tax relief that comes with it, so while government is doing something about the income tax and tax stamps, it is also increasing the VAT flat rate scheme which was abolished for small entities in 2015 but brought back by this administration under the new VAT rate. So government gives you some form of tax relief and similarly increase taxes.”
“So it’s like a sweetener so you can take the bitter medicine and it runs through the budget,” said Mr Terkper in an interview monitored by norvanreports.
Government in its attempt to shore up revenues for this year given the significant fall and rise in revenue and expenditure respectively in 2020 due to the pandemic, announced in the 2021 Budget Statement a number of newly introduced taxes as well as the revision of some existing ones.
The taxes include; the 1% VAT health levy (Covid-19 health levy), sanitation and pollution levy, energy sector recovery levy (Delta Fund), road tolls and the 5% financial sector clean-up levy.
On the other hand, government also outlined some initiatives (tax reliefs) to cushion the effect of the pandemic on the populace. The tax reliefs include; 30% income tax rebate for companies in the tourism and hospitality industry.
Suspension of quarterly income tax instalment payments for the second, third and fourth quarters of 2021 for small businesses using the income tax stamp system. As well as the suspension of quarterly instalment payments of the vehicle income tax for the third and fourth quarters of 2021 for trotros and taxis as part of measures to reduce the cost of transportation.
Speaking on the issue, Mr Terkper intimated that he is not against the revision and subsequent introduction of new taxes by government to raise revenue as it has become necessary to do so given the country’s high fiscal deficits and unsustainable debt situation, but for the current government to resort to more taxation than previously experienced during the Covid crisis when prior to coming into office described as ‘nuisance’ taxes implemented by the NDC government to resolve the power crisis (Dumsor).
“I am not blaming government for resorting to taxation because they are all austerity measures, for the 18 IMF programmes that the country has gone through, we have always used a combination of tax and expenditure management, debt management, borrowing and real sector rehabilitation, that’s the mix and it’s normal. But my point is that in past crisis and in which players in the current administration participated but then turned around to belittle the use of taxes for instance through the ESLA which is by the way the foundation for payment of energy costs and bank bailout costs through the ESLA bonds, and for them to come into government and make Ghanaians believe that you can manage a crisis without resorting to taxation, critique some of the taxes and christen them as nuisance taxes and make them seem irrelevant.”
“When you present that type of situation as non-performance, as not being able to be innovative and then you come and no matter the severity of the crisis and despite the loans acquired and by the way this is the first administration to have loans specifically targeting a crisis, and then on top of the fortunes of 3 oil fields you now resort to more taxation than was even previously experienced,” he argued.
