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President Nana Addo-Dankwa Akufo-Addo said she was concerned about the burden of tax exemptions granted to foreign businesses and individuals for the economy.
According to him, these exemptions are no longer viable for the country and will soon be subject to review, as the government seeks ways to improve revenue mobilization for national development.
Tax exemptions relating to import duties, import VAT, NHIL on import and national VAT, said the president, rose to 4.6 billion GH ¢ – accounting for 1.6% of GDP in 2018. These figures do not include personal income tax exemptions, concessions on tax rates, tax breaks on oil, exemptions from the customs tax enjoyed by diplomatic missions and dispense processing fees in ports.
Overall, the tax exemptions would have cost the country more than US $ 2.4 billion in 2018, which represents more than 4% of the country's GDP – a situation that the president has strongly criticized, describing it as a stubborn heel. Achilles and a growing threat his speech on the state of the nation yesterday.
"Revenue mobilization is the main challenge in managing our economy, with the tax exemption policy, in particular, proving to be an Achilles heel and a growing threat to fiscal stability and revenue generation … we continue at this rate, in less than sixteen years, half of Ghana's revenue will be deducted as a tax exemption.
"This is not sustainable, and we intend to do something to turn the tide. by introducing appropriate measures that can upset the simple and comfortable arrangements that many people have become accustomed to, but that we must take to ensure we have the strongest foundation for the economic take-off that has eluded us so long, "said President Akoufo- Dit Addo.
The government has consistently missed its revenue target, prompting the International Monetary Fund (IMF) to urge economic managers to devise innovative measures to boost domestic revenue mobilization.
The government has not reached its domestic revenue target for the third quarter of 2018 of 9.5%, achieving 31 billion GH ¢ over a projected amount of 35 billion GH ¢; a situation that Finance Minister Ken Ofori-Atta attributes to "underperformance of tax and non-tax revenues from oil".
The informal sector has long been an area in which the government has always been urged to develop innovative measures to link it to the tax net, representing about 70% of the country's businesses.
In 2017, according to data from the Ghana Statistical Service, the sector accounted for over GHG 73 billion, or 28.6% of GDP.
Although the sector represents a large part of the economy, it is estimated that only about 200,000 businesses in the sector pay taxes, which represents a meager 2% of taxpayers.
To find a solution to this problem, as of April 2018, the Ghana Revenue Authority (GRA) has put in place a Tax Identification Program (PIN) that will ensure that all persons carrying on business activities in the country will have a TIN.
The goal is to attract the majority of informal sector players to the tax net to improve revenue mobilization.
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