Concerns Mount over Tax Exemptions as Businesses Seek Benefits under Ghana’s 1D1F Policy

A surge in businesses seeking tax exemptions under Ghana’s One District One Factory (1D1F) Policy has raised concerns over the impact of the policy on the nation’s finances.

Introduced to incentivise businesses under the 1D1F initiative to expand and
create jobs, the tax exemption initiative has resulted in requests of about $450
million.

Mohammed Mubarak Muntaka, a lawmaker in Ghana’s Parliament, expressed alarm over the substantial revenue losses to tax exemptions when he addressed the issue in Parliament on Wednesday.

“We cannot continue to give away such a huge portion of our revenue to foreign
businesses and then go to borrow money at very high costs. It doesn’t make any
sense,” said Muntaka.

According to him, almost every enterprise operating under the 1D1F umbrella has been on the corridors of government with requests for tax exemptions, which suggests a widespread exploitation of the opportunity.

Muntaka, who is Member of Parliament of Asawase in the Ashanti Region, took a
swipe at Parliament for its poor oversight over such requests.

“If you see some of the items these businesses list for tax exemptions and how they manage to get Parliament to approve them, you wonder if we are doing our oversight duty well,” he said.

He said in many cases, Parliament grants tax waivers to companies based on
certain activities they plan to undertake. However, during the execution, they
deviate to engage in other activities.

Muntaka stressed the need to shift policy from tax exemption mechanisms to a
tax credit system that would provide tangible benefits to the nation.

“With a tax credit system, the credit is deducted when a business is about to pay
tax. Business managers must provide evidence that the deductions are
legitimate before they can claim the credit,” he said.

He said under such a reform, the $450 million tax waiver requests could be
reduced to less than $200 million if businesses were required to demonstrate
their eligibility for tax credits.

However, Majority Leader Alexander Afenyo-Markin countered claims regarding the government’s tax waiver requests for businesses under the One District One Factory initiative in his address to Parliament on Tuesday.

He defended the initiative, saying that tax waivers are intended to stimulate
economic growth rather than incur losses for the state.

“Tax exemptions are used to attract investments, but critics are looking at them with a very narrow perspective. When a government introduces tax exemptions, it is aimed at driving economic growth. It is not without benefits,” said Afenyo-Markin.

He argued that companies investing in the country should receive relief for the
importation of materials and equipment, emphasizing that the state would
ultimately benefit from such incentives provided to businesses.

By Cynthia Essandoh