Implementation of the Luxury Vehicle Tax could force vehicle owners to turn to counterfeit roadworthy certificate producers in order to avoid the ‘nuisance tax’, governance expert Abdallah Ali-Nakyea has warned.
With the imposition of a luxury vehicle tax on vehicles with a capacity of 3.0 litres and above, owners of such vehicles will pay between GH¢1,000 and GH¢2,000 when registering the vehicle and subsequently a similar amount when renewing their roadworthy certificates.
This revenue-generating measure, Mr. Ali-Nakyea argues, is an additional cost to the specified vehicle users “because the luxurious nature is already factored in the duty payable on the vehicle’s import cost”.
In view of this, he said, it may soon become a nuisance tax, as it is likely to compel users of those vehicles to patronise forged roadworthy certificates if no countermeasures are taken to check the certificates.
“Moreover, if the argument is anchored on the consumption of fuel by these high capacity vehicles, then the tax point is on fuel which is already on the high side – and these high capacity vehicles are indeed already paying the taxes since the higher the consumption the more fuel one consumes, hence the higher the taxes paid,” he said.
However, he noted that if government still sees it as a major source of revenue, it could be introduced as part of Customs duty when the vehicle is imported.
“But this would likely impact Common External Tariff (CET) with its challenges, hence it’s still not a viable possibility – and it would be better for government and citizens if it is scrapped,” added.
Already, some business operators have complained that the tax has increased the cost of doing business as company vehicles with high engine capacity have also become taxable, particularly those with private number registration plates.
Income tax band review ‘needless’.
Mr. Ali-Nakyea was commenting on the 2019 Budget Statement and Economic Policy presented to Parliament by the Finance Minister, Mr. Ken Ofori-Atta, and also said the intention of government to review the 35% rate under the income tax band from GH¢10,000 and above per month to impact monthly incomes above GH¢20,000 at a rate of 30% is not a relief, because it was an unwelcome imposition in the first instance.
“It is not tax fairness to require an individual earning GH¢20,000 and above to pay tax at 30% when a company earning same pays tax at 25%. Indeed, a company in the hotel industry even pays tax at 22%; whereas a free zone company, after its 10-year tax holiday, pays tax at 15% on gains and profits arising on sales in the country and 8% on exports.”
He said the rates in the band could have been adjusted as 0%, 5%, 10%, 15%, 20% and 25% with the income bands adjusted respectively, even if some few high-income earners are the target.
“This may soon be another nuisance tax, as it is not likely to generate the needed revenues yet will distort the labour market. There is thus a need for reconsideration.”
These notwithstanding, he also commended government for a number of policy initiatives announced in the budget. For instance, he said the intention of government to enforce the Taxpayer Identification Number (TIN) to the letter is one sure way of broadening the tax net.
“Ensuring enforcement where compliance fails should be the way to go,” he added.
Additionally, he said government’s decision to make use of third-party data sitting in various databases of both the private and public sectors for tax administration purposes as part of the move to broaden the tax base was laudable.
But he said the listed institutions should be compelled to release data to the GRA for capturing income earners to ensure they contribute their quota to tax revenue.
“In fact, data from third-parties should have been utilised a long time ago. There is no point in government agencies segregating their respective data when it could be collectively utilised to boost revenue.”
He also outlined a number of steps for government to raise more tax revenue, focusing on enhancing voluntary tax compliance through increased taxpayer education to curb tax evasion and tax avoidance.
He proposed improving voluntary tax compliance and taxpayer services through GRA providing assistance to taxpayers who do not know how to comply with filing their returns and paying their taxes due, and strict adherence to use of the taxpayer identification number (TIN) among others.