Government revenue losses through tax exemptions or expenditures, is estimated to be around GHS 18bn to GHS 22bn by the International Monetary Fund (IMF).
According to the Fund, this makes up 4-5% of the country’s nominal Gross Domestic Product (GDP) which was valued at GHS 459bn at end-2021.
The revenue loss estimation by the Fund, is in stark contrast to the much touted GHS 5bn revenue loss through tax exemptions by some economic analysts in the country as well as the government.
Making the assertion in its 2021 Article IV, the Fund called for the passage of the Bill adding that adequate reporting requirements and accountability mechanisms in relation to discretionary granting of incentives should be implemented to address and curtail the existing tax exemptions which are causing a drain on public finances.
“Tax expenditures have been estimated to constitute at least 4-5 percent of GDP, most of which are unlikely to meet a social cost-benefit test. The draft Tax Exemptions Bill (currently scheduled for Parliamentary examination) seeks to improve transparency and to centralize the process for granting exemptions.
“Beyond this important step, however, further work is needed to ensure the implementation of adequate reporting requirements and accountability mechanisms in relation to discretionary granting of incentives (for example, evaluation criteria for new exemption requests), and to address and curtail the existing tax exemptions which are causing a drain on public finances—both statutory incentives as well as those agreed in bilateral contracts with investors,” said the IMF in its 2021 Article IV assessment report on Ghana .
Tax Exemption Bill to feature in IMF-Ghana talks
Speaking on the issue of tax exemptions at a CSO Budget Forum, Fiscal Policy Specialist with Oxfam, Dr Alex Ampaabeng, noted talks about the passage of the Tax Exemptions Bill is likely to feature in the ongoing negotiations between the government and the IMF.
According to him, the IMF is likely to raise concerns and question why the government has been unable to pass the Tax Exemptions Bill given that it was a condition for their exit in the 2015 IMF Programme.
Tax Exemptions Bill withdrawn from Parliament
Government, some weeks ago, was reported to have withdrawn from Parliament, the Tax Exemptions Bill which it laid before the House in 2017.
Reports indicate that, the withdrawal of the Bill by government was to make way for corrections and amendments to the Bill.
New information reaching norvanreports however, indicate that, the Tax Exemptions Bill has been re-laid before Parliament as at Wednesday, July 6, 2022.
This, many believe is due to the fact that government would not want its inability to pass the Bill to inhibit or stall its negotiations with the IMF as the government over the next few months is expected to engage in a protracted negotiation with the IMF.
The Tax Exemptions bill, when approved, is expected to harmonise the tax exemption and incentives regime in the country and help make it more efficient.
It will comprise tax waivers given to local and foreign companies to encourage increased investment and more foreign direct investment in the economy.
Since 2017, government has made several attempts to pass the Tax Exemption bill to streamline the grant of exemptions.
Source: norvanreports