Tax Partner at Deloitte Ghana, Gideon Ayi-Owoo, has shared his thoughts on the proposed tax cuts promised by presidential candidates of both the NPP and the NDC.
Speaking during the NorvanReports, Economic Governance Platform, and BudgIT Ghana X Space discussion on the Topic “Tax Cuts: Liveline For the Average Ghanaian Or Political Sweet Talk?”, Mr Ayi-Owoo averred that with Ghana currently under an IMF programme, it will be interesting to see how the winning political party in the upcoming general elections will make a convincing argument for the tax cuts to the IMF.
The country’s current $3bn IMF programme is heavily revenue driven with a number of taxes to be implemented and help the Government increase its tax revenue to GDP to at least meet the African average of 18% of GDP.
For this year – 2024 – the Government has set a revised revenue target of GHS 177.2 billion representing 17.4% of GDP.
“Ghana is currently under an IMF programme and as such, a lot of these tax cut proposals are not just going to be political in terms of the fact that whoever is in power would have the mandate to change it, but then because of the agreements or the IMF facility that we’ve gone into, and so some of these decisions will not be entirely up to the Government to make that political decision.
“But more specifically I would have wanted the parties to help us understand how convincing they are going to put the argument before the IMF for the tax cuts and implement them as promised,” he quipped.
Several tax analysts have raised serious doubts over the feasibility of the ambitious tax proposals outlined by Ghana’s two leading political parties, cautioning that the removal of these levies, without a clear strategy to replace the lost revenue, could derail the IMF-backed fiscal consolidation efforts.
Both parties have pledged to abolish the e-levy and the COVID-19 levy, alongside reducing certain port duties—a move that analysts warn could undermine the government’s fiscal stability.
According to tax experts, the repeal of the COVID-19 levy and the e-levy as promised by the two political parties will cost the Government some GHS 7.7 billion in expected revenue, further widening the country’s already big fiscal gap.
Speaking further during the X Space Discussion, Mr Ayi-Owoo averred, that the country per its current tax structure has four major tax revenue handles that contribute over 60% of the Government’s total revenue.
Asserting that, the removal or reduction in the rate of any of the four major tax handles will have a significant revenue reduction implication for the Government.
“So with regards to our tax system, we have four major tax handles, what I’ll call the big four in terms of our tax revenue, and these big four contribute to 60% of the Government’s tax revenue collection. So there will be a significant impact on our economy or tax collection, once the Government touches any of these big four, it’s going to affect the Government’s total revenue collection. The government has set a target of tax to GDP of 16.8% for the year. And as of June, we had done 7.1% of the target,” he quipped.
The four major tax handles he quipped are VAT, Corporate Income Tax, Personal Income Tax (PAYE), and Import duties.
Source:norvanreports.com