Ghana has been found to be overly generous with its tax reliefs as the country has been losing significant amounts of revenues over the years.
According to the World Bank, Ghana’s tax system has been performing poorly compared to its peers. In its 8th Economic Update on Ghana, it was revealed that the underperforming and narrow tax system is further marred by what they describe as “generous tax breaks.”
Ghana, according to the World Bank, has over 24 different tax breaks available to companies enabling them to avoid paying the required taxes.
Between 2015 and 2020 alone, the Bretton Woods institution’s analysis reveals Ghana lost an estimated revenue equivalent to 1.3% of its GDP through these generous tax reliefs.
Based on the World Bank estimate, analysis by The High Street Journal reveals that between 2015 and 2020, Ghana missed out on corporate taxes estimated at US$4.41 billion due to tax reliefs. For instance, based on the GDP figures in 2015, 2016, 2017, 2018, 2019, and 2020 Ghana lost an estimated revenue of US$642.33 million, US$663.91 million, US$717.86 million, US$762.45 million, US$812.11, and US$816.27 million respectively.
“Ghana’s tax system does not generate as much revenue as it could because there are many reliefs which narrow the corporate income tax (CIT). Between 2015 and 2020, Ghana has missed out on an average of about 1.3 percent of its GDP in corporate tax revenue each year. Part of the reason for this is that there are more than two dozen different types of tax breaks for companies,” parts of the World Bank Update noted.
The Bank is therefore urging the government to reform its tax break system which is siphoning huge sums of revenue from the country.
“By reducing or eliminating some of these generous tax breaks, Ghana could improve its tax system and collect more revenue from corporate taxes,” the report further indicated.
Meanwhile, a tax waiver request worth US$ 335 million, covering 42 private businesses operating under the 1D1F flagship programme of the government is currently before Parliament for consideration and approval. The immediate past Chairman of Parliament’s Finance Committee and Member of Parliament for Obuasi West Kwaku Kwarteng and the Minority side have fought against the tax waiver request while the Majority Leader Alexander Afenyo-Markin has been leading the majority side to have it passed.
The consequences of this huge revenue miss can be seen in the continuous borrowing by the government to balance its planned budget leading to the ballooning debt levels. In addition, this revenue shortfall due to tax breaks partly plays a role in the underdevelopment of the country since the low levels of revenue mobilization make it impossible for the government to fund developmental projects.
