New taxes likely to burden poor, vulnerable

George Osei-Bimpeh.

Some of the new tax proposals by government will only go to worsen the plight of the poor and vulnerable in society, SEND Ghana, has lamented, calling for fair and just tax system, where payers contribute according to their ability to pay.

The civil society organisation said government could have been more innovative with the taxation option by targeting the ‘haves’ instead of burdening ‘the have-nots’, too, with the same taxes. “We are concerned that some of the tax proposals in the 2021 budget are more consumption based, and the fact is, the burden will fall more on the poor and vulnerable,” says George Osei-Bimpeh. Country Director, SEND Ghana.

He spoke in Accra during his outfit’s annual forum on the 2021 National Budget Statement and Economic Policy.

In particular, he said the COVID-19 Health Levy – 1 percent increase in NHI levy; 1 percent increase in VAT Flat Rate; the 5.7 percent increase in petroleum prices at the pump – Energy Sector, Recovery Levy of 20 pesewas; the 10 pesewas Sanitation and Pollution Levy per litre on petrol/diesel are all consumption based taxes and will worsen the plight of the poor and vulnerable if implemented flatly.

Ideally, SEND Ghana, a subsidiary of SEND Foundation of West Africa, says it believes that progressive taxation, where corporations and the richest individuals are taxed more in order to redistribute resources, is the way to go as far as government’s quest to reducing inequality is concerned.

For instance, he explained that increases in the VAT rate and the petroleum taxes have multiplier effect on all other sectors. “These will obviously translate into high public transport fare, cost of food and other basic goods and services consumed by all, with the poor feeling the brunt more.”

What options are there for government?

According to SEND Ghana, the proposed Sanitation and Pollution Levy could be flipped as ‘sin tax’ or ‘polluter pay tax’ on plastic bag usage to address the plastic bag menace, as exist in Germany, Belgium, Hong Kong, Bangladesh, South Africa, Kenya, Rwanda, Botswana, among others.

It also wants government to relook the implementation challenges/bottlenecks with the luxury vehicle tax and consider reintroducing it, as well as the high-income earner tax – personal income tax band rate exceeding GH¢10,000 at a rate of 35 percent. It said the latter could be reviewed to include an additional band of GH¢20,000 and above at a rate of 30 per – introduced in the 2018 mid-year budget review.

“To our disappointment, the government bowed to pressure from various interest groups and economic elites and repealed these taxes in less than a year. Records from the 2018 performance indicators show that personal tax revenue projection out-turn recorded a 0.6 percent increase over the revised budget figure. Indeed, by our estimation, the revenue targets for the last half year of 2018 were exceeded partly due to these and other progressive tax measures that were introduced,” the CSO fumed.

Other progressive tax measures such as enhancing the efficiency in the collection of property tax, taxing high net worth individuals, reducing excessive tax holidays for multinational companies, Mr. Osei-Bimpeh stated, need to also be looked at.

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