Oxfam calls for proper reporting of tax exemptions regime
Fiscal Policy Specialist with Oxfam, Dr Alex Ampaabeng, has called for proper and strict reporting of tax regimes following the passage of the Tax Exemptions Bill by Parliament on Friday, June 25, 2022.
Speaking to the media, Dr Ampaabeng averred the Finance Ministry, following the passage of the bill, should ensure a strict and proper reporting regime detailing exemptions given at the end of every fiscal year.
According to him, implementation of a strict reporting regime by the Finance Ministry, will enable the government modify, scrap or introduce new exemptions where necessary.
“Every year the Finance Minister needs to come out with the number of exemptions given and what we have gained from it as a country.
“And this is important because it helps the government to know what exemptions to modify, what exemptions to cancel and even the kind of new exemptions to introduce (sic),” he remarked.
State loses GHS 27bn to tax exemptions
According to the Minister of Finance, Ken Ofori-Atta, the country lost about GH¢27 billion to tax exemptions granted some businesses between 2008 and 2020.
The amount translates to about GH¢2.2 billion surrendered in tax waivers each year for the 12-year period.
Making the disclosure to Parliament, the Finance Minister also said since 2008, it was only in 2020 that the lost revenue declined to about GH¢1.8 billion.
“It is true, as Ranking Member mentioned, that some GH¢27 billion had been lost to tax exemptions.
“This brings into focus the need for all of us to protect the public purse. That is an important social re-engineering for us, as we lose revenue on many fronts,” he said.
“However, for this year, Ghana will likely make some savings of GH¢460 million on tax exemptions,” Mr Ofori-Atta added.
Meanwhile, Government annual revenue losses through tax exemptions or expenditures, is estimated to be around GHS 18bn to GHS 22bn by the International Monetary Fund (IMF).
According to the Fund, this makes up 4-5% of the country’s nominal Gross Domestic Product (GDP) which was valued at GHS 459bn at end-2021.
The revenue loss estimation by the Fund, is in stark contrast to the much touted GHS 5bn – or less – revenue loss through tax exemptions by some economic analysts in the country as well as the government.
Making the assertion in its 2021 Article IV, the Fund called for the passage of the Bill adding that adequate reporting requirements and accountability mechanisms in relation to discretionary granting of incentives should be implemented to address and curtail the existing tax exemptions which are causing a drain on public finances.
“Tax expenditures have been estimated to constitute at least 4-5 percent of GDP, most of which are unlikely to meet a social cost-benefit test. The draft Tax Exemptions Bill (currently scheduled for Parliamentary examination) seeks to improve transparency and to centralize the process for granting exemptions.
“Beyond this important step, however, further work is needed to ensure the implementation of adequate reporting requirements and accountability mechanisms in relation to discretionary granting of incentives (for example, evaluation criteria for new exemption requests), and to address and curtail the existing tax exemptions which are causing a drain on public finances—both statutory incentives as well as those agreed in bilateral contracts with investors,” said the IMF in its 2021 Article IV assessment report on Ghana .
