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Tax Exemptions To Be Further Reduced   
 
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13-Nov-2018  
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With the on-going discussions at the government level for a possible review of some clauses concerning tax exemptions, it is being anticipated that there will be a scrapping of some of the tax waivers for multinationals and mining firms in order to complement revenue generation in the country.

Discussions between finance ministry and Ghana Revenue Authority chieftains have intensified recently, ahead of the unveiling of the 2019 budget later this week and this has put some of the biggest beneficiaries of tax exemptions on edge.

The International Monetary Fund (IMF) in the fifth and sixth review under the extended credit facility recommended that although several sectors benefit from reduced corporate tax rates and tax holidays, some of these tax holidays can be discontinued – mutual funds, venture capitals – while others can be replaced by a system which better targets investment. The Fund wants stronger action in this regard – the actions agreed with government for implementation in 2018, would only improve tax revenues by a mere GHS70 million, or 0.03 percent of GDP.

In 2017 alone, import exemptions granted to foreign companies and other institutions rose by 15.5 percent to GHS2.6 billion.


The rise in exemptions from GHS2.3 billion in 2016 to the 2017 figure reveals the country’s inability to control the amount of tax freebies granted to foreign firms in spite of the government’s stated determination to curb them. The amount lost to import exemptions was about 8.1 percent of 2017 tax revenue, which was at GHS32.2 billion.

Studies by the World Bank indicate tax exemptions granted are estimated to be about five percent of Gross Domestic Product (GDP).

However, despite its desire for significantly bigger tax revenues, government is circumspect about cancelling tax exemptions wholesale because they are perceived as a major factor in attracting major foreign corporations who have the luxury of being able to choose which countries to invest in from a wide range nationwide.

This notwithstanding, an Economist at the Institute for Fiscal Studies (IFS), Leslie Dwight Mensah has advised that to ensure the country accrues the benefits anticipated for granting tax exemptions, there is the need for a much stronger monitoring regime.

In an interview with Goldstreet Business, Mensah said, “after awarding an exemption, and if you determine that the benefits outweigh the cost; you have got to have a monitoring regime, to ensure that the benefits that were anticipated, which therefore encouraged the granting of the exemptions, would certainly flow into the economy.”

Mensah said the challenge is that, many of the exemptions are not monitored to ensure that benefits which incentivized the granting of the exemptions are actually realized.

The exemptions are primarily granted to businesses coming into the country through the Ghana Free Zones Authority (GFZA), the Ghana Investment Promotion Council (GIPC), diplomatic and development institutions, as well as specialized bodies such as members of the Ghana Medical Association.
 
 
Source: Goldstreetbusiness.com
 
 

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