Ghana in a season of levies
Seth Terkper, a former Minister for Finance, has said the country is currently in a “season of levies.”
The erstwhile Minister‘s assertion follows the introduction of the E-Levy on the back of several levies that have been imposed on Ghanaians by the incumbent government.
Speaking in a webinar post the 2022 Mid-Year Budget Review, the former Minister noted despite the numerous levies introduced by the government, there has been no significant improvement in the country’s total revenue with tax revenues for instance remaining almost stagnant.
Aside failing to improve the country’s domestic revenue position, the imposition of these levies have resulted in the distortion of major tax handles such as the Value Added Tax (VAT).
“Some of the present economic challenges are due to stagnant inflows and the distortion of major tax handles. The first major revenue source of this government was the conversion of the NHIL and GETFund to straight levies including the E-Levy.
“The government since abolishing most of the taxes it came to meet in 2017, has since introduced taxes such as the financial sector levy, national fiscal stabilisation levy, extension of ESLA, Covid levy, pollution and sanitation levy, and others,” he remarked.
“When you add all these levies, it still does not improve the country’s revenue situation. So really, we are only in a season of levies,” he added.
Mr Terkper has always argued that policy distortions to the country’s second-biggest tax handle – the Value Added Tax (VAT) – is impeding its ability to generate the needed revenue for government.
He notes that, policy distortions hindering the ability of VAT to generate high levels of revenue include the decoupling of the GETFund and NHIL, from the VAT and the subsequent conversion into straight levies.
According to him, the exclusion of GETFund and NHIL from VAT and imposition on goods and services as straight levies and the subsequent charge of VAT, denies businesses the needed input tax credit and refunds and also adds to the high costs of goods and services which makes businesses uncompetitive.
The denial of input tax credit and refunds for businesses, he noted, results in tax evasion and avoidance leading to low levels of revenue generation from the tax handle.
The former Minister’s assertion was once corroborated by a Deputy Commissioner in charge of Strategy, Research, Policy and Programmes at the Ghana Revenue Authority (GRA), Dr Charles Addae who noted that VAT contribution to GDP was 6.2 percent in 2004, rising by 41 percent in 2008 but then declined to 27.2 percent in 2020.
Adding that, VAT has now been overtaken by Corporate Income Tax (CIT) as the largest tax handle.
