Dr Mahmud Bawumia has admitted the claims by former Finance Minister, Seth Terkper, that Ghana is witnessing “the worst” tax system ever.
Mr Terkper described the current tax regime under the Akuffo Addo/Dr Bawumia government as the ‘most punitive’ and ‘worst tax structure’ that the country has ever had.
Further indicating that, such punitive tax regime ends deprive the nation of the needed revenue as taxpayers find ways and means of evading and avoiding the tax. However, Dr Mahamudu Bawumia has prmised a new, “friendly” flat tax regime when he is elected President.
“So, if you have a simplified tax regime it is better and compliance increases”, Terkper said in an interview last week. “And the evidence is that if you look at our tax-to-GDP ratio, well, until recently as GRA is claiming — the highest point at which revenue was collected was 2015 per the percentage of GDP, not nominal terms.”
Consequently, in admittance to Terkper’s argument, the Vice President and Flagbearer of the NPP in his national address to outline his vision and priorities for Ghana, last week, there is the need to reform the tax system to the advantage of businesses, especially small and medium enterprises, (SMEs), which constitute the majority of the Ghanaian business community, while also encouraging the payment of the new friendly taxes,.
“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 declared.
“With the new tax regime, the tax return should be completed in minutes! We will also simplify our complicated corporate tax system and VAT regime.”
Dr Bawumia also stated that, to start the new tax system on a clean slate, “My government will provide a tax amnesty, i.e. a complete exemption from the payment of taxes for a specified period and the waiving of interest and penalties, up to a certain year to individuals and businesses for failures to file taxes in previous years so that everyone will start afresh.”
“Tax digitalisation will be implemented across all aspects of tax administration. Everyone will be required to file a very simple tax return electronically through their mobile phone or computer. There will be no manual or paper filing of taxes from 2025. Faceless assessments will provide transparency and accountability,” he added.
In the past two months, the government has tried to implement two new taxes, thus, a 15 percent VAT on electricity and and emission tax. Although, it has suspended implemetation of the VAT on electricity tax after organised Labour threatened a nationwide demonstration.
Apparently, during the debate of the 2024 Budget Statement, the minority caucus, accused the Akufo-Addo government of having introduced some 50 new taxes since 2017.
“Mr. Speaker, you recall in 2017 this same Finance Minister told this House that they were removing so-called ‘nuisance taxes.’ That was a hoax! Today, we are witnessing an epidemic of nuisance taxes, taxes, and more taxes”, Minority Leader Cassiel Ato Forson told parliament in his concluding remarks on the 2024 budget debate on the floor of Parliament on Wednesday, 29 November 2023.
“This government has burdened Ghanaians with over 50 taxes despite their promise ‘to shift the economy from taxation to production.’ Mr. Speaker, notwithstanding the over 50 taxes imposed by this government since 2017, this 2024 budget is introducing additional taxes worth GH¢11 billion,” Dr Forson added.
“Mr. Speaker, any additional tax will worsen the extreme poverty in our dear country. We cannot support these new taxes because they will put an extra burden on businesses. Already, businesses are collapsing because of the high cost of doing business in Ghana.”
“We cannot support these new taxes because currently, tax exemptions pending before the Finance Committee amounts to GH¢5.5 billion, equivalent to USD449 million”, Dr Forson emphasised.