Taxes on international trade, one of the major components of Non-Oil Tax Revenue, remains a major avenue through which the government of Ghana raises its revenues to undertake its developmental programs.
This tax handle has seen a significant improvement over the past five years and it’s expected to continue its impressive run in the medium-term. According to data from the Ministry of Finance, revenue from Import Duties outperformed its target for the first 9 months of the year by GH¢ 75,006,437.
Per the data, even though the government expects to raise a total of GH¢4,833,251,182 from import duties between January and September this year, the actual proceeds were GH¢4,908,257,619. This means government exceeded its target by 1.6 percent within the period.
Following the impressive performance of this tax handle, Government, has for the second time this year, revised its expectations concerning this tax. In the mid-year budget, government revised its expected proceeds from international trade taxes to GH¢6,613,520,000. However, the provisional outturn announced in the 2022 budget statement is now GH¢6,660,898,736 for the 2021 fiscal year.
Expectations for next year
Proceeds from international trade taxes are expected to rise further to GH¢9,029,968,322 in the 2022 fiscal year.
Despite the outbreak of the COVID-19 which disrupted global supply chains last year, International Trade Taxes recorded a significant improvement in 2020. According to data from the Bank of Ghana, revenues from international trade amounted to GH¢8,112.67 million last year, the highest recorded since 2016.
Remarkably, Taxes on trade related activities outside the shores of the country out-performed the expectations of the government last year as they were GH¢3,398.46 million above the target of GH¢4,714.21 million. International trade taxes rose by 51.8 percent in 2020 compared to GH¢5,345.97 million collected in 2019, thus, pre-COVID-19.
Ideally, most economies do not rely on international trade taxes as a major source of revenue generation, but are often used as policy instruments to control importation and exportation of certain goods and services. Yet, for most developing countries, such taxes contribute significantly to their revenues and are regarded as one of the sources of revenues.
Government policy
Based on this, the Restoration of the Benchmark Values of imports by suspending the 50 percent discount on selected General Goods and the 30 percent discount on vehicles is likely to contribute significantly to government revenues next year. The finance Minister, Ken Ofori-Atta, who announced the revision, stated that government seeks to make the policy more targeted.
“After two and a half years of operation, the temporal benchmark (discount) policy on imports introduced as a stop-gap measure will be reviewed to make it more efficient and targeted. The review will align the policy with current development needs to protect the environment, local industry, strengthen public safety, and support public health. The review will cover vehicles and selected general goods”.
Ken Ofori-Atta
However, the amount of revenues government will generate from international trade, which are mainly import duties, will depend on how importers will respond to the price increase. Already, freight charges are soaring globally which is contributing to the rise in global inflation. If after the revision, importers still continue to import those commodities that were affected by the policy, then government is likely to meet its targets from this tax handle next year.
