Business & Financial Times: Assess overall impact of tax exemptions on revenue mobilization efforts

Tax analysts are impressing on government to remove unwarranted tax exemptions if the state intends meeting its 2020 domestic revenue target of GHC 65.8 billion.

Although the Ghana Revenue Authority (GRA) has made some progress in its tax collection efforts, there still remains a void that needs to be filled with respect with the country's tax collection efforts.

In the 2019 State of the Nation Address, President Nana Addo mentioned that tax exemptions in respect of import duties, import VAT, import NHIL, and Domestic VAT had grown from GHC392 million in 2010 to GHC4.66 billion in 2018.

The President said this is not sustainable and the Deputy Minister of Finance, Mr Kwaku Kwarteng also said the government appreciated the weaknesses in the tax exemption and would introduce new measures in the Tax Exemptions Bill to deal with the shortcomings.

In line with the President's statement on tax exemptions, the Minister of Finance submitted an Exemptions Bill to Parliament in March last year. Also, the International Monetary Fund (IMF) is strongly advising government to consider increasing some existing taxes and re-introduce others government branded as 'nuisance' taxes and scrapped in 2017, as part of the short-term measures to address the persistent revenue shortfall.

Persistent shortfall in revenue has pushed government to increase borrowing, especially from external sources, to finance its many projects, thereby, putting the economy in list of countries regarded by the IMF as having a high risk of debt distress.

The continuous rise of tax exemptions impacts negatively on how much the government mobilizes as revenue to the state. Hence, the call by some tax analysts for the speedy passage of the Exemptions Bill into law.

Studies on Ghana's tax exemption regime concludes thatthe growth in tax exemptions and reliefs are not only unsustainable, but the benefits to the economy from some of these exemptions and reliefs are doubtful.

It may be time to reassess some of these tax exemptions and their overall impact on revenue mobilization efforts. We recall that Institute of Fiscal Studies (IFS) late last year said the introduction of the Exemptions Bill to parliament is a bold and commendable step towards addressing the excesses of the country's overgenerous exemptions regime.