Ahead of the 2020 budget presentation next week, Economist Dr. Lord Mensah has expressed concern about the frequent changes made to the country’s tax laws.
According to him, such changes could ward off investors who might find them bad for long-term business planning.
The current Finance Minister in an attempt to create a conducive environment for businesses scrapped what it termed as nuisance taxes in the 2017 budget. He, later on, introduced the vehicle luxury tax as well as a 35% tax on people earning GHC 10,000 and above, only to scrap them at later dates. The latest is the increase in the Communication Service Tax from 6 percent to 9 percent in the 2019 mid-year budget.
Speaking on the impact of such moves Dr. Lord Mensah said it creates uncertainty for businesses.
“If you are taxing, you can’t be coming to parliament every now and then to change tax policy here and there. Because when you do that you create investor discomfort. This is because the next investor who is coming to put his money in our environment will not know exactly where you’re going to bite with your taxes. It could be some of his produce and this can make them uncomfortable.”
Poor Tax compliance affecting revenue collection
The Finance Minister Ken Ofori-Atta described the government’s revenue target set over the past four years as somewhat over-ambitious given that tax compliance has generally not performed beyond expectations.
The government’s revenue target for July 2019 fell short by GHS5 billion; prompting concerns from the International Monetary Fund (IMF) that the government needs to enhance revenue collection or it may have to cut its spending to keep the deficit in check.
Speaking last week on Citi TV’s Point of View with Bernard Avle, Mr. Ofori-Atta said that among the reasons for the revenue shortfalls is the fact more people are not paying the right taxes and as a result, the set targets appear overly ambitious.
“We are in tough times. Maybe you and I are not paying the taxes we should be paying; maybe I was too optimistic with regards to my revenue projections. Be that as it may, I think revenue has gone up on average between 15-20 percent each year since 2017.
Even in these doldrums, we are up by 11 percent compared to last year. But we are certainly missing our targets and we need to do something about that. That is clear to all of us especially the new leadership that we have brought to the GRA. We’re truly expecting great things from the people we have put in place,” he said.
The government in June this year undertook some structural reforms at the tax-collecting agency where the three Commissioners for Domestic Tax collection, Customs Division, and Support Services Division were all rotated.
Additionally, more than 1,400 GRA personnel had their posts changed in a bid to provide the needed boosts to revenue collection. A new GRA Board Chair in the person of Prof. Steve Adei has also been appointed to spearhead revenue growth.
Despite these measures, the government could still not meet the GH¢31.8 billion (9.2 percent of GDP) revenue target it set for July 2019; only raising GH¢26.8 billion (7.7 percent of GDP).