Economist at the University of Ghana Business School, Professor Patrick Asuming has raised concerns over the NPP manifesto promise to introduce a flat tax system describing it as regressive.
This manifesto promise, the NPP flagbearer, Dr. Mahamudu Bawumia explains will ensure easy computation and flexibility to the taxpayer.
But reacting to this campaign promise Prof. Asuming explained that although the flat tax system is simple and easy to implement, the system is not progressive enough. He explains that a flat tax system allows all taxpayers irrespective of their income pay the same percentage of their income as tax.
This tax structure usually places a larger tax burden on low-income earners putting them under a higher financial strain while high-income earners and the wealthy do not feel the impact compared to the low earners.
With these impacts, the flat tax system is often considered regressive since it does not increase with higher income levels and has different impact across different income groups,
“A flat tax system has its merits. It’s very simple. It’s very easy to implement. Its computations are straightforward. But it also has its own challenges. Usually, if you want to promote or make the tax system progressive with a flat tax rate it’s not something that will achieve that objective because essentially, people are paying the same percentage of their income. That is not the most progressive kind of tax system,” Prof. Asuming indicated to The High Street Journal in an interview.
He therefore indicated that “the most progressive type of tax is where people pay a higher percentage, the higher their income; the type that we currently we have.”
Critics of the flat tax system believe that it deepens income disparities and heavily affect lower-income households. They contend that a tax system that does not take into account the varying financial circumstances of citizens risks creating an unjust society where the rich get richer and the poor continue to struggle even more.
For Prof. Asuming, the idea of a flat tax system from the NPP is probably emanating from their ideological background of “Property Owning Democracy.”
