Courage Kingsley Martey, senior economist at asset manager Databank, is urging government to ensure the passage of the Tax Exemptions Bill into law as the Finance Minister prepares to present the mid-year budget review to Parliament on July 29.
According to him, the current tax exemptions regime costs the nation over 2 percent of Gross Domestic Product (GDP), a situation he described as worrying given the government’s persistent revenue mobilization challenges.
“The mid-year review presents an opportunity for government to give an update of what it is doing in relation to the review of the tax exemptions regime,” said Mr. Martey in an interview with Business24. “In the 2021 budget, the new taxes and levies introduced were expected to rake in about GH¢2.1bn, so if the tax exemptions regime is reduced by 0.5 percent of GDP, [the government] would be earning or saving just what [it is] expecting to get from new taxes to support or increase revenue performance,” he added.
He clarified that his call does not mean tax exemptions are unnecessary. “There are some necessary tax exemptions for our stage of development to attract capital into our economy, but it tends to be abused,” he said.
“You can have people whose tax holidays have expired, but then they change the form of their business to enjoy a new set of tax holidays. We need to find a way of closing those loopholes to prevent people, particularly non-indigenous businesses, from exploiting them—and then we will be making savings for the state.”
Savings from cutting exemptions, in addition to broadening the tax base, will reduce the need to increase taxes on existing tax payers, he added.
Mr. Martey also described the government’s revenue expectation for 2021 as quite ambitious, adding that the state may have to revise down its expectation or do a lot more to achieve it.