Ghana loses $2.27b annually through tax incentives
The Importers and Exporters Association of Ghana have joined the list of companies asking for one kind of tax exemption or the other, as consultations for the 2016 Budget condlude.
Th Importers and Exporters have argued that prevailing economic challenges leave them no space to absorb any additional taxes. They have therefore proposed to the ministry of finance to spare them any additional taxes in 2016. The association has been pushing for exemptions from the special tax levy for several years now.
President of the Importers and Exporters Association, Sampson Awingobite says " We have been making a case about the special tax levy for sometime now without success. But now all we are asking for is it should be granted. And even if its not granted , no additional taxes must be added to importation. We are already suffering under the terrible exchange rates."
The Chamber of mines has also called for exemptions from special levies charged on price of fuel for mining companies. Mining companies pay more for fuel than the ordinary customer, something the Ghana Chamber of Mines is calling an end to. They premise this claim on the drastic fall in the price of gold on the international commodities market.
Deputy minister of Finance, Mona Quartey, in response to the claims says, " We understand the claims by the companies. We want to listen to them, this is what the consultative meetings are for. We will now deliberate over their claims and see what the best decision will be. Meanwhile, the consultative process ended today, and we are happy with all the inputs we got."
Meanwhile, Business and Finance lecturer at the University of Ghana Business School, in an exclusive interview with Pulse Business has challenged all the claims for tax exemptions by these companies. " I don't see why these companies should be asking for tax exemptions. Entities like these must inure to the benefit of government by way of the taxes they pay. Otherwise, how else will government benefit from them."
Dr. Laud Mensah added that " if you are talking about the exchange rate being high,these companies will be right in demanding the Bank of Ghana to make inputs into the economy in order to stabilize the currency, because the Central Bank owes it to them. But in terms of tax exemptions I totally disagree with their claims."
In a related development, It is estimated that Ghana loses around S2.27 billion every year in corporate tax incentives granted multinational businesses.
This amount is three times the country's budget allocation to the health sector.
According to a new report published yesterday by ActionAid and Tax Justice Network-Africa (TJN-A), the negative impacts of corporate tax incentives include giving undue advantages to big firms and multinationals at the expense of smaller and domestic industries.
It said the development also promotes corruption by enabling special treatment to be given to specific companies
The report said West African countries are losing an estimated US$9.6 billion of revenue each year by granting tax incentives to foreign companies.
The report noted that three countries - Ghana, Nigeria and Senegal - are losing an estimated $5.8 billion a year through the granting of corporate tax incentives.
It stated that Ghana loses around $2.27 billion, Nigeria around $2.9 billion, and Senegal up to $638.7 million.
If the rest of ECOWAS lost revenues at similar percentages of their GDP, total revenue losses among the 15 ECOWAS states would amount to $9.6 billion a year.
It stated that West African governments provide corporate tax incentives, including tax breaks and holidays, in the belief that they attract foreign investment, which will in turn create jobs, but the report states that this belief is both unfounded and harmful.
Tax Justice Network- Africa's Executive Director, Alvin Mosioma said extractive companies would invest with or without tax incentives.
Unlike manufacturing, the extractive sector does not employ a large local workforce.
The report, entitled West African Giveaway, states that while there has been increased foreign investment in the region, it is largely due to the presence of natural resources like oil and diamond, "the natural resources that West Africa has are rare and valuable."
The tragic irony, Mosioma said, is that "foreign companies do not consider tax incentives to be an important factor for investment; they would prefer good infrastructure, such as reliable roads and electricity." Tax pays for the provision and maintenance of roads and electricity, as well as healthcare and education."
The report calls for West African governments to review the tax incentives they are granting with a view to abolishing all unproductive incentives.