Tax exemptions rise by 1,073% in 8 years
Tax exemptions in the period of eight years (2010 – 2018) increased from GHS 391m to GHS 4.6bn, indicating a 1,073 percentage points increment over the eight year period.
Growth in tax exemptions were mainly in the form of import duty, import value added tax, import national health insurance levy and domestic value added tax.
Currently, at an estimated GHS 5bn per annum, tax exemptions exceed total revenue from the mining sector in 2019, and almost half (47.58%) of revenue receipts from the extractive sector in 2019.
In a stakeholder engagement on tax exemptions held by the Natural Resource Governance Institute (NRGI) on Tuesday, December 6, 2022, stakeholders – particularly CSOs – noted that there is need for government to reduce tax exemptions granted businesses in the country.
Stakeholders are of the view that government needs to put in place some monitoring tools that will ensure that the reasons for which businesses are granted tax exemptions, are indeed being attained.
Additionally, the monitoring tools are to ensure that revenue leakages that existed in the previous tax exemption regime do not persist, especially in view of the passage of the recent Tax Exemptions Act.
The country’s revenue take from the extractive sector has been through handles such as Value Added Tax (VAT), Corporate Income Tax, Property tax and Capital Gains tax.
Other instruments include bonuses (Signature, discovery and production) royalties, surface rentals and other rent taxes.
The Ghana Extractive Industries Transparency Initiative (GHEITI) reports that, the mining sub-sector contributed about GHS 2.3 billion in revenue to the government of Ghana.
Over the same period, the oil and gas sector also added about $1.7 billion to the revenue basket of the country.
As significant as this revenue contributions are to government, stakeholders have consistently quizzed if the country is not short-changing itself through the granting of tax exemptions to companies operating in the extractive sector
Suffice to indicate that import exemptions have been estimated at GHS 10bn for 2022.
Tax revenue being projected to increase from about 14% to about 15.5% of GDP by 2026, is indicative of the need for the country to claw back on its tax exemptions.
Tax exemptions as part of contracts and agreements, stakeholders further noted, are major contributory factors to low tax revenue generation from the extractive sectors.
The stakeholder engagement by NRGI was to dialogue on the rationalization of the exemptions regime in the extractive sector for 2023 and beyond, with the objective of making propositions for amendments and influencing the guidelines and regulations for implementing the new Tax Exemptions Act, ACT 1083.
The stakeholder engagement focused mainly on the following;
• the objectives of revenue Maximisation in the extractive sector and rhe need to incentivize investors;
• the fitness for purpose of ACT 1083, as the country aims to expand its tax revenue generation capacity.
• make propositions to influence the regulations and guidelines for implementation of the Exemptions Act 2022, ACT 1083.
