A Professor at the University of Ghana Business School, Lord Mensah, has stated that although tax exemptions that are given to companies can stimulate growth for job creation, they can also be abused by companies that may be politically aligned.
Apart from the possible abuse, Prof Lord Mensah also states that every exemption that is given comes at a cost to the state. Given the current health of the local economy where the country is even struggling with revenue generation, granting tax exemptions should not be prioritised.
His comments come in the wake of the allegation made by the Minority in Parliament that the government is seeking to grant substantial tax waivers amounting to GH¢7 billion to individuals associated with the trade industry.
This revelation came amid an existing request for a GH¢5 billion tax waiver before the Finance Committee, purportedly presented as incentive packages for the One District One Factory (1D1F) policy.
Mr Yussif Sulemana who is also a Ranking Member on the Trade and Industry Committee said during a press briefing in Accra on Wednesday, December 13, that the Minority would vehemently oppose any attempt to impose additional regressive taxes on Ghanaians unless the government eliminates these significant tax waivers.
“We have also been reliably informed, and we are speaking because we have seen documents that suggest that they’re bringing another GH¢7 billion tax waiver request to Parliament. Now, if you put the two together, we are talking about GH¢12.5 billion tax exemptions.
“Here, you are trying to grant GH¢12.5 billion to your friends and family members in the name of tax exemptions under 1D1F. At the same time, you are imposing taxes to the tune of GH¢11 billion. Can you juxtapose the two?” he asked.
“We think that it doesn’t make sense to us, and so we are saying that the tax bill that they are going to introduce in this particular budget will face some stiff opposition. We will not sit down and allow them to impose taxes on our people,” he stated.
Asked whether tax exemptions should be considered given the current state of the economy, Prof Lord Mensah said on the Ghana Tonigt show on TV3 Wednesday, December 13 that, “It depends on the motive behind the exemptions, there are some exemptions that can be given one way or the other to stimulate the economy. For instance, if you are giving incentives for businesses to expand, then one way or the other you encourage employment and other things.
“Another thing will be particularly looking at exemptions in an environmentally friendly investment area, that one you are less propagating or enhancing investment in areas that are environmentally friendly.
“From where I sit, it depends on the motive behind the exemptions. But we should also appreciate that every single exemption that we provide is a cost to the economy. So, an economy that is struggling for revenue generation and especially when we find ourselves with IMF that we have outlined revenue generation patterns that we want to follow and for which we have frontloaded it in such a way that in the next two to three years we want to hit a certain target of revenue generation about 16 to 30 percent of our revenue generation of GDP. Obviously, it is expected that we will not give chance to these exemptions but it depends on the focus of the government. If the government has a plan as to the kind of exemptions to provide.”
He added “There could also be an abuse of these exemptions, especially when it is politically aligned and it turns out that those influential people who are running the businesses who are importing and are the ones that are enjoying these exemptions, then it becomes a problem, then the economic motivation for the exemptions is not what we are looking at. So exemptions, one way or the other can be good depending on the focus.”
Earlier, Information Minister Kojo Oppng Nkrumah also said that the concerns raised by the minority against the list of companies that were requesting tax exemptions were legitimate.
Asked whether the government would address concerns raised by the Minority and the other stakeholders in the 2024 budget statement despite its approval, while speaking on the Ghana Tonight show on TV3 Thursday, December 7, Mr Oppong Nkrumah, also a lawmaker for Ofoese Ayirebi, said “The government has already pushed the Exemptions Bill because we are clear not all tax exemptions are justified but like every other jurisdiction we are also clear that some exceptions are justified.
“Fancy a scenario where we need to build an interchange in Takoradi, the PTC Interchange, a few hundreds of million of dollars which we don’t have and therefore we are borrowing from creditors to construct that PTC Interchange which would help our brothers and sisters in the Western Corridors a lot.
“The question is, should you impose a tax on that list of items in the credit facility? Because if you do that Four Hundred Million Dollar project may end up Four Hundred and Sixty Million Dollars because of the taxes and you will have to come and ask the Ghanaian taxpayer to pay Four Hundred and Sixty Million Dollars instead of Four Hundred Million Dollars, that is the decision you have to make.
That is why you have to determine whether every request for tax exemption is worth it or not. It is not a blanket rule that all tax exemptions are bad or all tax exemptions are good. I think it is legitimate that our colleagues raised questions that we want to examine the request for exemptions that are yet to be considered by the committee,” he said.