Scrap wasteful tax incentives, reform tax system – CSO

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…to raise enough revenue for economic recovery

The Tax Justice Coalition has reiterated calls for fundamental changes in the country’s tax system that will plug all holes and leakages for government to raise enough revenue to finance its growing expenditures, especially in the face of the global pandemic.

The call, according to the group, comes on the back of persistent domestic revenue shortfall stemming from generous tax incentives and abuses by corporate organisations which has contributed to significant shortfall of tax revenue, leaving government with no option than to borrow to finance its budgetary needs.

In an event to commemorate this year’s Global Tax Week, the civil society group called on government to scrap wasteful tax incentives benefitting wealthy elites and corporations alone at the expense of the state.

“Billions of foregone revenues from tax incentives and tax abuses by corporations and wealthy individuals could have been used to strengthen essential public services delivery to ensure our rights to health, access to water and sanitation, decent housing, and sufficient mass transportation and wealthy services. Such resources could have been utilized to mitigate the impact of the COVID-19 pandemic,” a statement presented by coordinator for the coalition, Bernard Anaba, stated.

Provisional fiscal data for the first half of the year show that revenue mobilisation fell short of target by 26 percent, resulting mainly from shortfalls in oil revenue, customs receipts and non-oil Non-Tax revenues. Total Revenue and Grants for January to June 2020 amounted to GH¢22 billion compared with a programmed target of GH¢29.7 billion.

To address this recurring challenge, the group has urged government to embark on progressive reforms that will apply more tax on large incomes, assets and wealth; and introduce a digital services tax, as well as the cancel bilateral tax treaties which have become disadvantageous to developing countries.

The Tax Justice Coalition further calls for policies that will promote domestic and regional tax transparency measures to identify and curb illicit financial flows by promoting country-by-country reporting for multinational corporations and public registers of beneficial owners of legal entities.

It is also calling for the promotion of exchange of information to ensure that all tax administrations will have access to the needed information to curb international tax evasion and avoidance; and also strengthen the fight against harmful tax practices which facilitate transfer mispricing, tax avoidance and illicit financial flows, including wasteful tax incentives, offshore financial services and harmful tax treaties.

Tax exemption in respect to import duty, import VAT, import NHIL, and domestic VAT have grown to GH¢4.6 billion, representing 1.6 percent of GDP in 2018.

These figures do not include exemptions from the payment of corporate and individual income taxes, concessions on tax rates, petroleum tax reliefs, customs tax exemptions enjoyed by diplomatic missions, and waiver of processing charges at the ports.

Overall, tax exemptions are estimated to have cost the country more than US$2.4 billion in 2018, which represents more than 4 percent of the country’s GDP, a situation President Nana Akufo-Addo has vehemently decried, describing it as an Achilles heel and a growing menace in his 2019 State of the Nation Address.

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