A new campaign to get the Ghana Tax Exemptions Bill passed into law by Parliament has begun. The bill has been stuck between cabinet and Parliament since 2019 despite overwhelming support by its passage into law by economists, financial analysts, public policy commentators, civil society organizations and the media, in order to plug a glaring loophole estimated to be costing government some GHc2 billion a year in foregone tax revenues.
The latest effort to get it passed is being led a group of civil society organizations who are being funded by Oxfam. Their immediate objective is to get the Bill back on the agenda of the incumbent 8th Parliament after the 7th Parliament, which was dissolved at the start of January this year, failed to pass it.
Under a Legislative Advocacy project, the Tax Justice Coalition, the Ghana Anti-Corruption Campaign Coalition and Parliamentary Network Africa, have commenced phase two of a campaign to ensure the passage of the Tax Exemptions Bill, which, when it comes into force as law, is expected to harmonize the tax exemptions and incentives regime, and make it more efficient.
Its promoters claim that it contains tax waivers given to local and foreign companies to encourage increased investment and more foreign direct investment into the economy. However, its opponents point out that since the bill tightens the conditions under which waivers and exceptions could be given – especially to major projects being financed through foreign direct investment – the bill would actually make Ghana less attractive as an FDI destination.
Actually, though the bill focuses on ensuring that tax exemptions are only given where Ghana stands to ultimately gain from the investments they attract, rather than the current situation where they are often granted effectively as favours to politically connected investors by legislators and senior government officials. Indeed, campaigners for the passage of the bill assert that the reluctance of some law makers and some top government officials to pass the bill is simply because it would take away their authority to grant such “favours.”
In 2019, Finance Minister Ken Ofori-Atta laid the Tax Exemption Bill before the 7th Parliament for approval. But the 7th Parliament failed to complete work on it until its life span expired, claiming that work was being delayed by back and forth between it and cabinet with regards to specific parts of its content.
According to the Programmes Manager of Parliamentary Network Africa, Gilbert Boyefio, the renewed campaign is the latest attempt to complete the task of giving Ghana a proper tax exemptions regime in place that favours the state rather than just politically connected investors and the people in authority they are connected to.
He insists: “This is a very important Bill for the economy of the country. We would all have to rally towards pushing and working towards bringing it back to Parliament for consideration and passage into law.”
However, the campaigners still wnt some changes to the bill before its passage. The Consultant to the advocacy project holds the view that the draft bill still needs to be strengthened in several areas before its re-introduction and eventual passage.
“The Bill is well-intended and contains good provisions that seek to protect Ghana’s revenue base. However, there are certain concerns that need to be brought to the attention of the Executive and the Legislature. My suggestions are that the Bill must also curtail the country’s tax expenditure that drastically reduces Ghana’s tax revenues without showing clear benefits and subject any conflict of inconsistency between the provision of this Act and any other enactment relating to exemptions in this Act.”
Tax analyst Dr Abdullah Ali Aakyea, further laments the inability of the authorities to ensure proper monitoring of imports and exports into and out of the country.
“If a letter is given to the community that a number of items are coming to you which they have approved (for a tax exemption) and they arrive, and you now come and ask them to come see you, then you are not monitoring. If you were monitoring, you would have realized that they have gone through all the right processes in getting ban exemption. Monitoring should be the beginning before we can even talk of this Bill and amendment. The monitoring would have brought out all the issues that we need to address in the Bill.
Most tax exemptions are given to encourage investment into certain industries adjudged to be of strategic importance to Ghana, with a view to enhancing their economic viability so as to ensure a favourable investment decision. However, a significant number of such exemptions over the past couple of decades have been found to have been approved without definite evidence – or even assessment – as to whether a tax exemption is needed to ensure adequate economic viability. In effect therefore, the tax exemptions are given to simply ensure extraordinarily high profitability of the beneficiary projects. Even worse, some exemptions have been found to have been given without the requisite Parliamentary approval.
The conventional wisdom is that those behind the approvals benefit financially from the beneficiary investors although instructively, no single conclusive evidence of this has been unearthed to date.
Nevertheless, it has been proven that Ghana is losing large amounts of potential tax revenues from tax exemptions given on projects that do not meet the criteria requisite for granting them.
The Legislative Advocacy programme runs from now to December, but if further changes are to be instituted it is very unclear whether a version of the drafty acceptable to both a Parliamentary majority and cabinet can be made ready. However, proponents of the Bill, having become exasperated by the delays in passing it into Law since 2019, are increasingly taking the stance that it should be passed even if well short of deal.
As one public policy commentator succinctly puts it: “Half bread is better than none. In this case the generation of GHc1 billion in tax revenues now being list to unnecessary exemptions would be far better than the current situation.
The Legislative Advocacy programme runs from now till December.