The MP for Ofoase/Ayirebi Constituency Kojo Oppong Nkrumah following the NPP manifesto launch has outlined a three-tiered approach to simplify the tax regime to foster clarity and predictability.
These proposed reforms are grounded in the belief that a more straightforward taxation system can reduce tax evasion, enhance business operations, and drive economic growth.
“One of the problems with taxation is when people can’t find some clarity and predictability. Therefore, people are doing much more tax evasion instead of tax avoidance.”
Hon. Kojo Oppong Nkrumah MP for Ofoase/Ayirebi Constituency
Hon. Kojo Nkrumah pointed out that the inherent complexity in the current tax structure, exacerbated by recent changes introduced to address economic challenges, has made the system more cumbersome.
This complexity, according to Hon. Kojo Nkrumah, is a significant deterrent to compliance and hampers the business community’s ability to plan effectively.
Import Duties: A Cedi-Based Flat Rate
To address these concerns, Hon. Kojo Nkrumah revealed that the NPP’s leadership is proposing a shift to a cedi-based flat rate for import duties. This change, he argues, would introduce much-needed predictability into the system.
Under this new system, importers would know the exact amount of duty they would need to pay before shipping their goods.
“If you’re bringing in a container of spare parts, you know that a container of spare parts is going to require a duty of 50,000 cedis or 40,000 cedis.”
Hon. Kojo Oppong Nkrumah MP for Ofoase/Ayirebi Constituency
Moreover, Kojo Nkrumah pointed out that the upfront knowledge would help businesses better manage their costs and reduce the uncertainty currently associated with the import process.
Hon. Kojo Nkrumah also highlighted the competitive disadvantage Ghana faces compared to its neighbors, particularly Togo, which operates under the more stable CFA franc. He pointed out that Ghana’s current system, which calculates duties based on the CIF (Cost, Insurance, and Freight) dollar value, is less predictable and often results in higher costs.
According to Hon. Kojo Nkrumah, the proposed cedi-based flat rate would align more closely with the economic realities businesses face, thereby making Ghana more competitive.
“We need to be competitive and so what the leader of the NPP is saying is that, we’re going to make import duties cedi-based and flat rate so that you have clarity.”
Hon. Kojo Oppong Nkrumah MP for Ofoase/Ayirebi Constituency
VAT Reform: Simplification and Deductibility
The second major reform Hon. Kojo Nkrumah noted pertains to the Value Added Tax (VAT) system. He criticized the current VAT structure for its cascading effect and the loss of the traditional VAT input and output deduction mechanism.
“If you look at the VAT spread currently, if you buy an item and they spread out the VAT for you, you are having a cascading effect in addition to that, you can no longer do the in and out as in VAT input and VAT output deduction as was traditionally available.”
Hon. Kojo Oppong Nkrumah MP for Ofoase/Ayirebi Constituency
According to Hon. Kojo Nkrumah, to simplify the VAT system, the NPP proposes collapsing the existing VAT structure into a single flat levy. This flat levy would restore the deductibility of VAT inputs and outputs, making the system more straightforward and predictable for businesses.
According to Hon. Kojo Nkrumah, on the Broader Implications of Tax Reforms; These proposed changes reflect the NPP’s broader economic philosophy, which prioritizes creating a business-friendly environment through streamlined regulations and reduced bureaucratic hurdles.
By addressing the issues of clarity and predictability in the tax system, the NPP party aims to stimulate economic activity, encourage compliance, and enhance the overall business climate in Ghana.
Hon. Kojo Nkrumah’s insights underscored the importance of a well-structured tax system in promoting economic growth.
By introducing a cedi-based flat rate for import duties and simplifying the VAT system, the NPP hopes to make it easier for businesses to operate in Ghana.
Hon. Kojo Nkrumah Pointed out that their approach not only aims to reduce tax evasion but also to create a more competitive and predictable economic environment, which could attract more investment and drive sustained growth.
Hon. Kojo Nkrumah’s commentary on taxation reforms highlighted a critical area of economic policy that could have far-reaching implications for Ghana’s future.
The proposed changes, if implemented, could lead to a more transparent, efficient, and competitive tax system, ultimately benefiting both the government and the private sector.
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