The ‘nuisance taxes’ must give way

Barely a week after he was appointed Finance Minister to replace Ken Ofori-Atta, industry players have started mounting pressure on Dr Mohammed Amin Adam to remove what they term as ‘nuisance taxes’ from the country’s tax structure.

Against the position of many that the new minister has very little to offer, industry players believe that the Mid-Year Budget Review expected to be laid before Parliament in the next few months can be used to remove taxes such as the much dreaded Electronic Levy (E-Levy), totally reverse the taxes on electricity consumption and the emission tax, among others.

The numerous port charges are also eating deep into the finances of importers, making it difficult to produce at costs competitive enough to enable them to fully leverage the benefits of the African Continental Free Trade Area (AfCFTA). (See full story on front page).

Much as it is early days yet because the new minister has not settled in his new role, the Graphic Business fully sides with the call by industry players for the removal of certain taxes such as the E- Levy, electricity consumption tax, and the need to ensure proper rationalisation of the numerous levies charged at the country’s ports, among others.

We strongly are of the opinion that the taxes in the system are far too many and seriously hurting those in the tax net.

At a time when we want businesses to expand and create more job opportunities, we are rather imposing more taxes to drain their capital or eat into the credit facilities they access from the banks and other financial institutions at cut-throat interest rates.

Ghana, unlike its peers in the sub-region or on the continent generally, has a very low tax to gross domestic product (GDP) ratio. While its peers are doing an average of 18 per cent of GDP, Ghana ranges slightly above 14 per cent.

Considering the very high debt levels and the close of the international capital markets to the government, it clearly stands to reason why the government would want to use all means, including introducing more tax handles to raise funds internally to meet its financial obligations.

However, in doing so, there is the need for the government to be circumspect to avoid a situation where industry players and households will suffer.

The complaints are many and deafening and, therefore, there is the need for the government to listen and adopt other measures to shore up revenue from domestic sources.

For instance, there are reports that the revenue collecting agencies are not being efficient with collection, a development which will definitely compel the government to raise taxes to make up for the shortfall.

But there is equally empirical evidence that the higher the taxes, the more businesses and households devise means to avoid honouring their obligations to the state. 

The solution, therefore, lies in widening the tax net to ensure that the many who do not pay do so to lessen the burden on the few already in the net.

As the Vice-President rightly put it, some of the taxes are counterproductive and deserve to be removed, a pledge he made in his address to the nation as he outlined his vision if elected president in the upcoming elections in December.

Like industry players and many others are demanding, this is the time to signal something positive to enable the people to repose confidence in him. 

For now, Dr Bawumia can make proposals to the new Minister of Finance to use the Mid-Year Budget Review to remove those taxes and start the implementation of drastic measures to rationalise the tax system.

The Graphic Business believes that we need an efficient tax system that lessens the burden on those in the tax net but at the same time ensures that more is collected to meet our financial obligations as a country.

Increasing the tax to GDP ratio to the level of our peers is definitely a good idea but the process should not come with new tax handles that stifle growth and make cost of production more expensive, rendering goods and services produced in the country uncompetitive. 

There is a window of opportunity to reverse the trend and the new Finance Minister has it all to prove.