Ministry of Finance
The Ministry of Finance says it is working on developing a comprehensive repository of tax expenditures to assist in the compilation and publication of annual reports.
George Swanzy Winful, the Director of Revenue Policy Division at the Ministry of Finance, revealed this in a keynote address he read on behalf of the Minister of Finance during the opening of a three-day regional follow-up technical workshop on tax expenditures in Tema.
He said tax expenditures constituted a significant part of public finances in Ghana notwithstanding the government’s effort to contain its rise, adding that over the last decade, tax expenditures resulting from incentives had reduced government revenue by between one and four percent of its gross domestic product (GDP).
He stated that most external assessments of tax expenditures conducted in Ghana over the past decade confirmed this, noting that all the studies concluded that the growth in Ghana’s tax exemptions and reliefs was unsustainable and the benefits Ghana’s economy gets from these exemptions and reliefs were doubtful.
He said in that light, the government in 2017 commenced a review of tax expenditures with an emphasis on tackling the systemic abuse in the import exemptions regime, stating that the review focused on import duty exemptions and tax reliefs with a view to eliminating abuses and improving efficiency in the applications of the incentives.
The review, he indicated, covered, among others, import duties, taxes, and levies payable by ministries, departments, agencies, and other government departments; import duties; and all forms of taxes and levies payable by both domestic and foreign companies.
Others include suppliers and contractors executing projects and contracts in the country; import duties and all forms of taxes and levies payable by employees, directors, and senior officials of both domestic and foreign companies; suppliers and contractors executing projects in the country; as well as import duties and all forms of taxes and levies payable by non-governmental and charity organisations.
He said some of the challenges noted at the end of the various assessments included unclear processes that led to a lack of transparency and inconsistent legal provisions, which created room for unintended discretion.
Others were conditionalities from development partners requiring exemptions in connection with development assistance, too many government agencies in the exemptions chain leading to failure to consolidate all tax expenditures (particularly tax incentives for investment) under the authority of the Ministry of Finance, and the proliferation of exemption clauses in various legislation mostly approved without recourse to the Minister of Finance.
The remaining challenges are clauses in legislation that permit sector ministers to grant exemptions without consulting the Minister of Finance, and there is no regular and systematic review and evaluation of whether the nation is achieving the goals for which the exemptions were granted.
To address this, a clause has been provided in the Revenue Administration Act, 2016 (Act 915), which prohibits any government institution or person from entering into an agreement that provides for the variation or waiver of tax without the approval of the Minister responsible for Finance.
This, he stated, has helped to minimise the arbitrariness in the granting of exemptions, adding that in 2017, the Ministry automated the import-related exemptions approval process, thereby reducing human interventions and improving efficiency.
The Minister for Finance, he added, also obtained Cabinet approval for an exemption policy that addresses some of the challenges encountered over the years, noting that “an exemption bill supporting the policy was accordingly laid before Parliament and subsequently approved in July 2022.”
He said the government was committed to streamlining the tax expenditure regime while working towards identifying more sustainable ways to provide incentives to support businesses and the vulnerable in society.
