NPP to move economy from taxation to production

The gross mismanagement of the Ghanaian economy by the Mahama-led National Democratic Congress government has resulted in the imposition of many taxes, with an increase in existing ones, thus increasing the burden on the private sector and serving as a major disincentive for production, the New Patiotic Party has noted.

The next NPP government, under the leadership of Nana Addo Dankwa Akufo-Addo, therefore, intends to shift focus from the excessive taxation to offer the required incentive for productive activities to thrive, and help create employment opportunities to tackle the escalating unemployment situation in the country at the moment.

The party has explained in its 2016 Manifesto that the deliberate plan to shift the focus of economic policy from taxation to production will lead to:

i. reducing the corporate tax rate from 25% to 20%;

ii. removing import duties on raw materials and machinery for production within the context of the ECOWAS Common External Tariff (CET) Protocol;

iii. abolishing the Special Import Levy;

iv. abolishing the 17.5% VAT on imported medicines not produced in the country

v. abolishing the 17.5% VAT on Financial Services;

vi. abolishing the 5% VAT on Real Estate sales;

vii. abolishing the 17.5% VAT on domestic airline tickets;

viii. reducing VAT for micro and small enterprises from the current 17.5% to the 3% Flat Rate VAT introduced by the Kufuor-led NPP government;

ix. introducing tax credits and other incentives for businesses that hire young graduates from tertiary institutions; and

x. reviewing withholding taxes imposed on various sectors (including the mining sector) that have constrained the liquidity of many businesses.

"The ensuing increase in production and economic growth, arising from a streamlining as well as the elimination and reduction of some of these taxes, will more than compensate for any temporary revenue shortfall. Growth is expected to increase to double digits starting 2017. Indeed, during the NPP tenure between 2001 and 2008, corporate taxes were slashed from 32% to 25% and tax revenue actually increased! The data shows that, notwithstanding (or because of) the high level of taxes, there is a revenue shortfall of GH¢700 million for the first half of 2016," the party has explained in its Manifesto.

The Manifesto has outlined additional sources of revenue, and therefore fiscal space to finance these tax reductions to include:

i. broadening of the tax base as a result of formalization of the economy;

ii. increase in tax compliance;

iii. reduced government expenditure as a result of increased collaboration with the private sector and prioritization of government expenditure;

iv. savings from the reduction of interest rates paid on the country's debt stock;

v. increase in oil and gas revenues from TEN and SANKOFA fields;

vi. elimination of corruption, especially in procurement of goods and services, which is estimated at about 1.5% of GDP annually, and

vii. plugging leakages in the administration of public finances.The Auditor General's Report has indicated that between 2012 and 2014, GH¢5.9 billion of government funds cannot be accounted for.