Business News of Friday, 13 October 2017
Tax Analyst, Abdallah Ali Nakyea has cautioned that government risks missing its revenue targets for 2018 if it goes ahead with the slashing of corporate taxes without working to increase compliance among businesses.
He explains that the development if not properly looked at, will also increase the burden of bridging the revenue deficit gap that has confronted the country over the past years.
Finance Minister, Ken Ofori Atta has disclosed a possible reduction of the corporate tax from 25 to 20 percent in the 2018 budget.
According to the Minister, the move should among others grow such businesses and afford them the opportunity to employ more people.
This will also be in fulfilment of the NPP administration’s promise to review taxes to relieve the plight of what it considers as an overburdened taxpaying population.
But reacting to the issue, Mr Ali Nakyea explained to Citi Business News government must tread cautiously if it is to be successful with the move.
“I have a challenge with the slashing of the corporate tax rate because I think we are competitive in the sub-region at 25% and unless we are able to improve tax compliance for all companies to file returns and pay taxes due from them. If we slash it we are going to have a bigger gap in meeting revenue targets,” he stated.
The NPP administration has since the assumption of office slashed a number of taxes and reviewed others downwards.
The taxes that have since been abolished include; 1 percent Special Import Levy; 17.5 percent VAT/NHIL on financial services; 17.5 percent VAT/NHIL on selected imported medicines, that are not produced locally; 17.5 percent VAT/NHIL on domestic airline tickets; 5 percent VAT/NHIL on Real Estate sales as well as Excise duty on petroleum.
Those that were reviewed include; reducing the National Electrification Scheme Levy from 5 percent to 3 percent; Public Lighting Levy from 5 percent to 2 percent while the 17.5 VAT/NHIL rate has been replaced with a flat rate of 3 percent for traders.
Mr Nakyea spoke on the sidelines of the launch of the 4th Edition of the book, ‘Law of Taxation in Ghana’.
A co-author of the book, Dr Benjamin Kumbuor explains that the book aims at improving the understanding of Ghana’s tax laws and increase revenue mobilization.
“It makes it easier for instance for both tax administrators and advisors because one you get the rules well cut out in a more systematic manner, then it is easier for people to reach out to them as a source and be able to see what they can do with it. So compliance is likely to increase and tax administration and tax advice would even be better for us.”