The role of taxation in development financing cannot be overemphasized. However the capacity of many developing countries including Ghana to raise the needed tax revenue to finance their development can easily be constrained by over-generous tax incentive regimes. Civil Society organizations in Africa are therefore pushing for the end of tax incentives to attract Foreign Direct Investment.
Ghana’s trade policy and development agenda have over the years been dictated by the desire to attract Foreign Direct Investment and to increase export earnings. Hence tax incentives have been a major strategic tool to achieve this. A recent research by Action Aid Ghana has revealed that Ghana may be losing $1.2 billion annually as a result of tax incentives. This loss of revenue could be channeled into developmental projects.
It is also estimated that over $138 billion is likely given away every year by some governments in Africa through statutory corporate income tax exemptions.
The UNESCO-sponsored Education for All Global Monitoring Report makes clear the potential of increased tax revenue in improving the quality of education for millions of children. The report found that increasing tax collection in 67 countries and devoting a fifth of government budgets to education could raise an additional $153bn for education in 2015. In 34 countries in sub-Saharan Africa an extra $4.5bn would be raised for education.
The research by ActionAid also showed that there is no empirical evidence that tax incentives encourage Foreign Direct Investments which translates into development but contribute to illicit financial flows.
The Civil Society Organizations including ActionAid are therefore calling on African governments to take full responsibility of the continent’s development through strategic exiting from aid dependency. They are also urging African countries to demand inclusive and multilateral global tax reform processes from investors. This they believe will help speed up developments in the continent.
NABIL AHMED RUFAI, E.TV NEWS
Email: [email protected]
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