The Tax Justice Coalition (TJC), a tax and policy advocacy group, has called on the Nana Addo government to review and streamline the country’s “regressive” tax measures as soon as practicable.
According to the Tax Justice Coalition, the current structure of several tax measures, including the Value Added Tax (VAT) and other indirect taxes, are impoverishing disadvantaged Ghanaians, and pushing more people into poverty.
The Group made the call during a session in Accra to analyze the 2023 mid-year budget review and make policy suggestions for better revenue collection in the country. It urged the government to take immediate steps to ensure that taxes do not overburden the poor, who are often impacted by regressive taxes and suffer the most during economic downturns.
Mr Vitus Adaboo Azeem, Chairman of TCJ, on his part noted that fair and progressive taxation would foster voluntary compliance. He maintained that this would increase domestic revenue mobilization to fund public goods and services.
“Much as we are facing an economic crisis, which hits hard on the ordinary Ghanaian, there is the need for adequate measures to protect the welfare of vulnerable Ghanaians. That is why we oppose excessive reliance on regressive taxes. VAT is already high, and when paired with petroleum and other taxes, it raises the entire cost of fuel, which raises transportation fares and food prices. This is detrimental to the welfare of the average citizen.”
Mr Vitus Adaboo Azeem
The Anti-Corruption Campaigner asked the government to adopt a more progressive and consumer-friendly tax policy, as well as to be aggressive in collecting taxes on income, wealth, and property.
Indirect Taxes, Inherently Regressive
Mr Benedict Doh, Finance Manager at the Ghana Integrity Initiative (GII), also stated that indirect taxes, such as VAT, are inherently regressive.
“VAT as we have it now is regressive because it has cascading effects; we see a situation where the Ghana Education Trust Fund (GETFund) levy and the National Health Insurance Levy (NHIL) are treated as trade levy, not as input tax.”
Mr Benedict Doh
Such a situation, he argued, allows those levies to be passed on to consumers as a charge before VAT is collected, “…which has negative implications for businesses because it affects their profitability. This is something that needs to be addressed.”
Ghana is currently going through economic challenges, notably significant inflation, which the World Bank projects will push about 850,000 Ghanaians into poverty. To navigate through the storm, the government through the Ghana Revenue Authority (GRA) announced the Value Added Tax (VAT) increment in the beginning of the year.
Moreover, the government introduced a new measure that will see a 10% tax applied to betting and lottery winnings. The Ghana Revenue Authority (GRA) outlined that the withholding tax will be automatically deducted at the point of pay-out for all betting, games, and lottery wins.
Ghana recently entered into a three-year IMF bailout program in May of this year, following a prolonged period of economic challenges. As part of the efforts to revive the economy, economic managers have urged the expansion of the tax base and the mobilization of domestic resources to drive the country back towards growth. However, regressive taxes will not have the desired effects on the economy as anticipated.
