Economist and tax consultant, Eric Amponsah Boateng, has revealed that individuals are paying more taxes than corporate bodies in the country.
According to him, the compounding nature of taxes by government on individuals in the country is detrimental to their sustenance. He indicated that government has introduced three new bills, and that looking at the growth and sustainability levy, excise duty and income tax act, the individual and employee is worse off.
Mr Boateng noted that the country is confronted with a situation whereby an employee, who earns a chargeable income of more than GHC50,000 a month is going to pay 35% of it as PAYE. He recounted that this same issue came up in 2015 whereby from August to December 2018, this happened and stakeholders kicked against it and that is the reason why from 1st of January, there was an amendment back to the 30%.
“When you look at the corporate tax rate, it’s still 25% and for those on the stock exchange and probably those in the hospitality, they are on 22%. But individuals are paying more taxes than the corporate bodies. Their issue is that industry is affected, the cost of doing business in Ghana has now increased and it’s because of the high import duties on items that we import to be able to produce the goods that we have. We also have the tariffs, electricity, water and even transportation. So, when you put all of that together, what it means is that those people in the manufacturing sector and those doing business generally have a challenge…”Eric Amponsah Boateng
Furthermore, Mr Boateng stated that from the beginning of the year, government had to introduce an additional two and half percent for the VAT, which shot up from 12.5% to 15%. He explained that due to the increment, it has led to an increase in revenue mobilization and that’s why the GRA was able to exceed its target for the first quarter.
Mr Boateng highlighted that the impact of IMF loan has been marginal on the economy. He indicated that this can be seen with the depreciation of the cedi.
“… You realize that the exchange rate – the last quarter of 2022 and let’s compare them with the first quarter of 2023. So, even though the import duties haven’t changed, because of the depreciation of the cedi, we are now paying more… When we got the first tranche of the IMF loan, temporarily, we saw the cedi appreciating against the dollar. But, for the past two weeks, you can see that the cedi is beginning to fall and rightly so because what we were expecting that money to be used for, what we have done is to just make sure that we introduced the dollar into the system and that pushed the cedi to appreciate.”Eric Amponsah Boateng
Ensuring tax compliance in the country
Commenting on his expectations for the mid-year budget scheduled to be presented by the finance minister, Ken Ofori Atta, Mr Boateng emphasized that for government to be able to achieve its revenue target, there must be compliance. Owing to this, he revealed that if government is introducing new taxes, it must engage the stakeholders so that they will also make some input.
“Notwithstanding that, they have gone ahead to do so. What is going to happen is that these taxpayers will not be able to generate the profit that you expect that will even enable them to pay the taxes that are expected… In fact, I expect the COVID levy to go off because we are no longer experiencing the effects of the COVID as we used to in the past.”Eric Amponsah Boateng
Moreover, Mr Boateng expressed the need for the finance minister to reintroduce tollbooths. He stated that this time, he expects all the tollbooths in the country to be mechanized because if that is done, government will realize that the expected revenue will be four to five times more than expected.
“The other area I would want the finance minister to look at is the withholding tax regime and the stability clauses that we have in some of the agreements that we have. I also expect government to reduce the import levies for specific goods that may be imported and used as raw materials so the manufacturing sector will be able to increase its outputs. When that happens, it will lead to an expansion in those businesses and eventually when that happens, employment will also increase. So, I think that there’s a lot that we can do, instead of introducing these three new tax measures.”Eric Amponsah Boateng