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The government has completed a draft policy aimed at reforming the tax exemptions regime in the country. The draft policy is expected to be passed into this year.
For the last eight (8) years, tax exemptions for import duty, import VAT, import NHIL and domestic VAT in the economy have grown from GH¢391.90 million representing 0.9% of Gross Domestic Product (GDP) in 2010 to GH¢5.2 billion which is 2.6% of GDP in 2017.
It is important to indicate that 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 processing charge exemptions at the ports.
The studies conducted by six different studies into Ghana’s tax exemptions regime by the Revenue Policy Division of the Ministry of Finance, International Monetary Fund (IMF), Organisation for Economic Cooperation & Development (OECD), GIZ and the World Bank, reveal that the growth in Ghana’s tax exemptions and reliefs is unsustainable, and the benefits Ghana’s economy gets from these exemptions and reliefs are doubtful.
Tax exemptions in Ghana have invariably provided the opportunity for abuse. But even without the irregularities, the exemptions in themselves, deny the country of much needed revenue, resulting in low revenue collection and reporting.
The fiscal deficit is projected at 4.2 percent of GDP in 2019 and is expected to remain below four percent of GDP from 2020-2022. The primary balance is expected to remain positive, stabilising the growth of debt and ensuring that government can meet its spending commitments without additional borrowing.
Total Revenue and Grants is projected to grow on nominal basis by 25.8 percent in 2019 of which the non-oil Tax Revenue growth is estimated at 19.1 percent in 2019 compared to a projected annual growth of 14.6 percent in 2018. The 2019 estimated non-oil revenue growth, reflects expected gains from ongoing reforms in revenue administration and tax compliance.
Total Expenditure is projected to grow by 27.0 percent, driven by an 11.2 percent growth in the wage bill to accommodate recruitments in the education, health and security sectors. Additionally, growth in the non-interest discretionary expenditures of Goods and Services, and Domestic financed Capital Expenditures reflect full funding for Government’s flagship programmes such as the Free SHS, Planting for Food and Jobs, and IPEP, among others.
The debt service cost from the recent financial sector cleanup has also been accounted for in the projections.
Source: Elorm Desewu || Economy Times