ICU, others reject IMF tax proposals

PROPOSALS from the International Monetary Fund (IMF) for the imposition of new taxes, increase in tax rates and the re-introduction of some old ‘nuisance’ taxes have been met with stiff opposition from analysts, and labour unions among other stakeholders.

There are fears implementation of the proposals would increase the tax burden on Ghanaian workers and businesses.
The Fund in a report published in December 2019 recommended measures to increase government revenue from domestic sources, saying “new taxes could yield 0.25 percent of GDP, while compliance could bring around 0.5 percent of GDP.”
The report advised the re-introduction of the infamous 17.5 per cent Value Added Tax (VAT) on financial services, an increase in the Communication Service Tax (CST) from 9 to 12 percent; the expansion of the national fiscal stabilization levy on all firms; the minimum chargeable income; and the reintroduction of the high-income tax rate of 35 percent.
The Fund further urged tax authorities to review the import duty benchmark which it said “has not generated the expected increase in imports through trade diversion to Ghana ports.”
ICU rejects proposals
General Secretary of the Industrial and Commercial Workers Union (ICU), Mr Solomon Kotei described the proposals as misplaced and urged government to ignore them.
Mr Kotei said, “we’ll be extremely shocked and surprised should government agree to implement those tax measures; we reject them outright and they should not see the light of day .”
“Any attempt by government to heed the advice of the IMF to increase and restore nuisance taxes, would spell doom for Ghanaians and Ghanaian businesses; it will amount to double standards for a government which came into office promising to focus on production and not taxation,” the ICU Boss told this reporter.

Analysts/economists
While admitting the need for managers of the economy to increase the tax effort, on the back of the country’s high debt distress levels, Economist Kweku Arthur-Annobil maintains government should not heed to the recommendations of the IMF, “as they only seek to address the problem in the short-term but don’t address the core difficulties, we have with our tax system.”
According to him, a reintroduction of VAT on financial services will have the same insignificant effect as it did previously and affect financial transactions.
Adding another 3 per cent to the CST within a year of the increase to 9 per cent  will only make things worse.
Mr Arthur-Annobil described as hasty the Fund’s call for a review of benchmark values of imports, saying “the policy should be given some more time before any review is made.”

Source: Isaac AIDOO,thefinderonline.com

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