Former President of Association of Ghana Industries (AGI), Dr Prince Kofi Kludjeson says although he welcomes the plan of the New Patriotic Party (NPP) Presidential candidate, Nana Addo Dankwa Akufo-Addo, to slash taxes, there is the need to tread cautiously.
Dr Prince Kofi Kludjeson raised questions on how an NPP government would compensate for government revenue if it slashes taxes.
“…the taxes is another major issue. We must carefully look at it because the country also needs revenue,” he told Joy News’ Latif Iddrisu after the NPP leader and his trade and economic team held a meeting with business leaders.
Former Trade Minister, Kofi Apraku, has described the AGI as the NPP’s “natural ally”.
The party, therefore, held the meeting with AGI at Trade Fair in Accra to present the party’s business plan to industry players. The NPP has vowed to make Ghana the most business-friendly economy in Africa.
Highlights of NPP Trade and Industry plan
The next NPP government, under the leadership of Nana Addo Dankwa Akufo-Addo, wants to shift focus from the excessive taxation to offer the required incentive for productive activities to thrive, and help create employment opportunities to tackle the escalating unemployment situation in the country at the moment.
The party has explained in its 2016 Manifesto that the deliberate plan to shift the focus of economic policy from taxation to production will lead to:
i. reducing the corporate tax rate from 25% to 20%;
ii. removing import duties on raw materials and machinery for production within the context of the ECOWAS Common External Tariff (CET) Protocol;
iii. abolishing the Special Import Levy;
iv. abolishing the 17.5% VAT on imported medicines not produced in the country
v. abolishing the 17.5% VAT on Financial Services;
vi. abolishing the 5% VAT on Real Estate sales;
vii. abolishing the 17.5% VAT on domestic airline tickets;
viii. reducing VAT for micro and small enterprises from the current 17.5% to the 3% Flat Rate VAT introduced by the Kufuor-led NPP government;
ix. introducing tax credits and other incentives for businesses that hire young graduates from tertiary institutions; and
x. reviewing withholding taxes imposed on various sectors (including the mining sector) that have constrained the liquidity of many businesses.
“The ensuing increase in production and economic growth, arising from a streamlining as well as the elimination and reduction of some of these taxes, will more than compensate for any temporary revenue shortfall. Growth is expected to increase to double digits starting 2017.
Indeed, during the NPP tenure between 2001 and 2008, corporate taxes were slashed from 32% to 25% and tax revenue actually increased! The data shows that, notwithstanding (or because of) the high level of taxes, there is a revenue shortfall of GHC700 million for the first half of 2016,” the party has explained in its Manifesto.
The Manifesto has outlined additional sources of revenue, and therefore fiscal space to finance these tax reductions to include:
i. broadening of the tax base as a result of formalization of the economy;
ii. an increase in tax compliance;
iii. reduced government expenditure as a result of increased collaboration with the private sector and prioritization of government expenditure;
iv. savings from the reduction of interest rates paid on the country’s debt stock;
v. increase in oil and gas revenues from TEN and SANKOFA fields;
vi. elimination of corruption, especially in the procurement of goods and services, which is estimated at about 1.5% of GDP annually, and
vii. plugging leakages in the administration of public finances.The Auditor
General’s Report has indicated that between 2012 and 2014, GHC5.9 billion of government funds cannot be accounted for.
Interactions with AGI
The NPP at the meeting stressed to work closely with the Central Bank to bring down interest rate. Nana Akufo-Addo said his government will hold a comprehensive review of the tax regime and AGI will be a key player after which the tax reduction or slashing will take effect.
Speaking to Joy News after the meeting Dr. Prince Kofi Kludjeson said it is not enough to maintain that taxes are too high but also examine the impact of the taxes on development.
“Ghana is growing….the Finance Minister went to the capital market for $750miilion, he got $4billion. It means things are improving again, although they may be down, things are changing gradually” he said.
He referred to Moody’s revision of Ghana’s economic health from B3 negative to B3 with a positive outlook.
In view of the gradual progress, he suggested it may not be prudent to make drastic changes that could compromise gains.
“We need to continue from where we are leaving off,” he said.
Nonetheless, he said “if taxes are down everybody will enjoy it..it is in the Bible”