Tax coalition criticises govt’s over-reliance on VAT
The Ghana Tax Justice Coalition (GTJC) has said the government’s decision to increase Value Added Tax (VAT) through the Energy Sector Levies Act, 2015, (Act 896) is unfair to Ghanaians and should be reduced.
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It said VAT was a regressive tax that affected the poor more than the rich in terms of income to buy goods and services, therefore, government had to be careful how it applied it.
Speaking to the GRAPHIC BUSINESS, the Coordinator of the Coalition, Mr Bernard Anaba, recalled that from 2013, the government, citing reasons to bridge the infrastructure gap, increased VAT from 15 per cent to 17.5 per cent.
“In 2015, the government comes back to say it has to increase to 17.5 per cent, and the two reasons they gave were that they wanted to rationalise all the taxes. And we are saying that that is not a good enough reason. Any tax that will affect the people requires that you look at its impact it is going to have and not how you want it to be,” he said.
He said the government again mentioned the road sector fund as a reason for the increase of VAT, “but that infrastructure fund includes the roads sector so for the same reason you are taxing us twice. You haven’t come to Ghanaians to say that for this fund, this is how much you have collected. So for these reasons we think that the recent increases by the government in terms of the energy levy are not warranted and it has to reduce them.”
The Energy Sector Levies Act, 2015, (Act 899)
The Act seeks to realign petroleum-related taxes by adjusting some of the levies and abolishing others.
The government, through a certificate of urgency, passed the Act in December 2015, which took effect in January 2016.
The coalition said although it was happy with government’s efforts to put an end to the unbridled tax incentive regime by reviewing the exemptions, permit processes and more, it was however appalled at the increasingly regressive nature of Ghana’s taxes with the introduction of more and more VAT since 1998.
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“The VAT rate has craftily increased from 10 per cent in 1998 (Act 546) to its current rate of 17.5 per cent. While we applaud and support any policy to mobilise domestic revenues, we also guard against the excessive imposition of regressive taxes such as VAT which in the long run exacerbate the problem of inequality in our society,” he said.
Recommendations
The Coalition commended government for its efforts to seal revenue leakages of the national purse to help safeguard revenues collected, and encourage compliance for local revenue mobilisation measures, including progressive and pro-poor taxation.
“The government should treat the Ghana Infrastructural Fund as a special revenue for which taxpayers deserve the right to know how much it has accrued,” it said.
The Ghana Tax Justice Coalition
The coalition campaigns for fair and equitable taxation, domestic revenue mobilisation and for citizens to pay their share of taxes for national development in a consensual, fair, transparent and accountable manner.