Former Minister for Finance, Seth Terkper has contended that the re-introduction of the GETFund and National Health Insurance Levy (NHIL) as separate was a bad idea that has negatively affected the country’s tax system.
The outgoing NPP administration in August 2018 decoupled the NHIL and GETfund levies from the Value-Added Tax (VAT) making them straight levies.
Six (6) years on, the former minister of finance has observed that the decision has made the tax system unnecessarily complex and less efficient leaving businesses and taxpayers to grapple with compliance challenges.
Seth Terkper says businesses now spend more time and resources complying with tax obligations, diverting attention and funds from productive activities. Tax administrators also face increased challenges in monitoring and enforcing compliance, leading to revenue leakages and inefficiencies.
Moreover, Ghana’s tax-to-GDP ratio which is an indicator of the government’s ability to generate revenue from economic activities has remained stagnant for years despite the decoupling exercise which was expected to cause some improvement.
The action, Mr. Terkper says has negatively affected the buoyancy of the tax system reflecting the inefficiencies of these measures.
He explained that, “when the value-added tax was introduced, about 18 taxes were subsumed, canceled, and subsumed in the VAT. This included GETfund, actually, the GETfund and NHIL, which became straight levies, were part of the VAT. Now, the flaw in reintroducing many of these taxes is that you make it difficult for the tax regime to be administered, and you make it difficult for taxpayers to comply with the tax because it becomes very complex if you have to account for 23 different taxes.”
“And it tells you, therefore, that these levies and others that were introduced have rather made the tax regime less buoyant,” he added.
Seth Terkper, who was speaking at the acceptance speech event of the President-elect, John Mahama, believes the solution lies in returning to a rationalized tax system, similar to the approach adopted during Ghana’s Structural Adjustment Programme in the 1980s and ’90s.
He revealed that in the next administration by focusing on four key pillars which are; income tax, VAT, customs duty, and excise duty, the government could simplify the tax system, enhance compliance, and improve revenue collection.
“What we are talking about is going back to the rationalization of the 1980s and 90s under the SAP ERP and making sure that the tax is dependent on the four pillars, which are income tax, VAT, tariffs or customs duty, and excise duty,” he indicated.
