Trotro, taxi drivers won’t respond to govt income tax rebate – Economist predicts

Economist Dr. Adu Owusu-Sarkodie has predicted that Ghanaians may not enjoy a decrease in transport fares even though government has announced the suspension of vehicle income tax for beneficiaries of commercial public transport popularly called ‘trotros’ and taxis.

Caretaker Finance Minister Osei Kyei-Mensah-Bonsu in presenting the 2021 Budget Statement said suspension of the “quarterly instalment payments of the vehicle income tax for the third and fourth quarters of 2021 for trotros and taxis” forms part of the measures to reduce the cost of transportation, ultimately cushioning the effect of the pandemic on the populace.

However, Dr. Owusu-Sarkodie has expressed that trotro and taxi drivers will not reduce fares even though government has scrapped these taxes.

In an interview with Samuel Eshun on the Happy Morning Show, he explained: “I have seen in the budget that they are giving the trotro and taxi drivers income tax rebate. That is where I am a bit skeptical because I believe these trotro and taxi drivers will not respond to that.

Usually, people respond to price increment but they do not respond to price decreases. If Government has given them income tax rebate, they are likely not to respond. In other words, they will still keep their fares and pocket the profit but if you increase it then they will respond. So, the overall effect will be increase in fares which will trickle down to increase in prices like tomatoes, onions and the everyday things that we buy and obviously it will impact on inflation going forward”.

Meanwhile, the economist has said that it will be difficult for Government to meet its expectation of 8% headline inflation rate. This he said is as a result of the newly introduced taxes and levies imposed in the energy sector.

In his delivery of the 2021 Budget Statement, Caretaker Minister of Finance, Osei Kyei-Mensah-Bonsu announced that government is proposing a Sanitation and Pollution Levy (SPL) of 10 pesewas on the price per litre of petrol/diesel under the Energy Sector Levies Act (ESLA) as well as Energy Sector Recovery Levy of 20 pesewas per litre on petrol/diesel under the ESLA.

He revealed that “on the basis of existing world crude oil prices, the implementation of the two proposed levies for sanitation and pollution as well as to pay for excess capacity charges, would result in a 5.7% increase in petroleum prices at the pump”.