A Professor at the University of Ghana Business School, Lord Mensah, has explained why he thinks Vice President Dr Mahamudu Bawumia will not have the room to remove the taxes that he has promised to abolish.
He explained that by 2025, Ghana will no longer receive a $600 million tranche from the International Monetary Fund (IMF) but rather $300 million per how the programme with the fund has been structured. Also, he added, Ghana no longer has access to the Eurobond market to borrow hence the main avenue will be for the government to rely on taxes to generate revenue.
This will make it difficult for Dr Bawumia , if he wins this year’s elections, to implement the promise to remove the taxes, Prof Mensah said.
Dr Bawumia had stated categorically that he would abolish the tax on electronic financial transactions, e-levy, if elected President of Ghana. The controversial tax was introduced in 2022, and prior to the introduction, Vice President Bawumia had declared his opposition to levies on electronic financial transactions in an interview.
Delivering his first major address to the nation after his election as NPP flagbearer, during which he gave broad policy outlines of a Bawumia Presidency, Dr. Bawumia minced no words in declaring his opposition to taxes on electronic financial transactions, declaring that he would abolish e-levy as President.
Dr Bawumia added that his bid for a Digital and Cashless Ghana would be significantly boosted if e-levy is abolished.
“To move towards a cashless economy, however, we have to encourage the population to use electronic channels payment. To accomplish this, there will be no taxes on digital payments under my administration. The e-levy will therefore, be abolished,” he declared at the UPSA auditorium on February 7.
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Dr. Bawumia also announced that as part of a new tax regime by his government, he will also abolish the emission tax, tax on betting as well as the proposed 15% VAT on electricity tariffs, if it is in existence by January 2025.
He also announced that his government would introduce what he described as a friendly, flat tax regime for Ghana, which will boost individuals and businesses, particularly small and medium-scale enterprises (SMEs).
“My administration will introduce a very simple, citizen and business-friendly flat tax regime. A flat tax of a percentage of income for individuals and SMEs, which constitute 98% of all businesses in Ghana, with appropriate exemption thresholds set to protect the poor,” Dr. Bawumia indicated.
Speaking on this issue on the Business Focus on TV3 Monday February 12, Prof Lord Mensah said “taxes are policies, that is what we need to appreciate. Policies depend on time, there are times when you may introduce a policy but will not rip the necessary expected benefits. As we speak now, because of the variations and inconsistencies in our tax handles, businesses are running away. The effects of these taxes have been price increases on our markets apart from the exchange rate issues that we have been having, so these are all economic costs.
“Ordinary Ghanaian is suffering to the point where the component of his salary that he uses to purchase food has increased to about 40 percent, so effectively these tax handles are having an impact on the typical Ghanaian, businesses and even the government itself. So effectively, if you want to introduce a flat rate or you want to abolish a tax, what do you do? You have to introduce it now because governance is about continuation.
“I can tell you that the vice president will not have the fiscal space to abolish all those taxes when we go into 2025. The reason is that by 2025, these IMF releases that we are receiving we will no longer be receiving $600million again, we are going to receive $350 million, that is how the $3 billion programme has been structured over the 3 years.
“We don’t have access to the Eurobond market, the taxes that you are going to use to manage the economy against the promises with digitalization, I can tell you that he will not have the fiscal space to abolish the taxes and to provide that flat rate. At that time the inconsistencies we have in our taxes would have cost us more as a result of businesses running away or people not getting jobs.”