A group of Civil Society Organizations (CSOs) made up of the Tax Justice Coalition, Ghana (TJC), the Parliamentary Network Africa (PNAfrica), and the Ghana Anti-Corruption Coalition Ghana (GACC), working under the Legislative Advocacy on the Tax Exemptions’ Bill have put together a set of proposals to strengthen the tax exemptions regime before it is laid in parliament.
The group believes that the amendments will not only strengthen the bill but help in harmonizing tax exemptions and incentives regimes in the country and will also make it more efficient for more revenue to accrue to the state.
In a document presented by the CSOs tasked with the responsibility of reviewing the bill before parliament, the Exemptions Bill should include a requirement that the tax incentive regime be underpinned by clear, transparent, and credible legal, technical and political processes to deter rent-seeking behaviors that grant tax breaks purely for private gains.
“Transparency through beneficial ownership information should serve as an additional prerequisite for the granting of exemptions as a safeguard measure. This will help to identify the actual beneficiaries of the exemptions, including those responsible and granting the exemptions to themselves.
Our Proposed Amendment under General Responsibility- Section 5 of the Bill:
(3) [Where required in (2), the beneficial owner (BO) in line with the Company’s Act 2019 (Act 992) shall be ascertained in the granting of such exemptions],” it said in a statement.
The Bill, secondly, should require that tax incentives are properly negotiated and not permit blanket provisions where all the tax handles are zero-rated irrespective of the policy implications. The government should be able to retain or exclude some specific taxes and levies such as the Ghana Education Trust Fund (GETFund) levy and the National Health Insurance Levy (NHIL) from some exemptions.
This will give the government some leverage and additional revenue. “The section 16 of the Bill should be amended or supported with Regulation to provide for this recommendation:
Our Proposed Amendment under General Tax Incentives -section 16 of the Bill: [Unless for concessional, government procurement and diplomatic exemptions, where customs duties and customs taxes are to be exempted or zero-rated, NHIS and GETFUND Levies shall stand and not be varied as prescribed by the tax provisions].”
The group noted that it is possible that omnibus exemptions to the President and the Presidency can easily be abused by third parties such as party supporters, friends and family. It is therefore necessary that the Bill is more specific on the President and should provide that only one or specified officer(s) can apply for exemptions on behalf of the President or the Presidency. This requirement should equally apply to emergency and security operations, which also need serious checking and inspections.
Under Section 6 (2)- Responsibility of the Minister, and Section 10 (7)- Diplomats and diplomatic missions, the Bill proposes the following: ‘The Ministry shall issue guidelines on the modalities for the vetting and granting of exemptions’, but the group proposed that “The Ministry shall issue written guidelines published in the Ministry’s website on the modalities for the vetting and granting of exemptions.”
Under Religious Organisations – Section 12, the objective of this provision must be reconsidered, the group noted.
“If the idea is that religious bodies should produce these items locally in five years’ time, it is perhaps not tenable because these items have associated religious myths or value depending on where they come from. For example, ‘Zamzam’ from Mecca has a special mythical value and cannot be locally produced. Hence, we propose that Section 12 (3), ‘the exemption under subsection (1) is applicable for up to five years after the entry into force of this Act’ must be reconsidered in the light of its objective.”
Under Section 19 (4)- Programmes and projects funded by grants, the bill proposes that where the items produced in Ghana are not suitable for the execution of a contract, an application shall be made to the Minister for approval.
The group instead proposed that ‘Not Suitable’ be defined in the bill or in the ensuing regulations.
The group believes that the government’s revenue mobilization strategies through the digitization programmes such as Tax Identification Numbers (TIN) registration, Revenue Assurance and Compliance Enforcement (RACE) etc., are excellent but they would not result in the kind of revenues envisaged without managing and curtailing tax exemptions as a priority. Tax exemptions are assured revenues and should be accounted for through a comprehensive management under an exemptions law.
Tax exemption bill
The Tax Exemption Bill was earlier presented to the 7th parliament but could not be passed. The bill was however reintroduced to the 8th parliament on November 16, 2021 and has since received several advocacies to be passed. The bill seeks to streamline tax exemption and as well curb the reckless abuse of exemptions in Ghana over the years especially for the benefit of private individuals at the expense of the taxpayer.