News Guide Africa

Tag: Taxes

  • Ato Forson courts support to scrap E-levy, betting tax in first budget

    Finance minister designate

     

    Adnan Adams Mohammed

     

    The Finance Minister designate, Dr Casiel Ato Forson, has assured Ghanaians that they can expect the first budget of the current administration – due in March 2025 and covering April to December –  to abolish electronic levy (E-levy), betting tax and the COVID-19 levy. He has insisted that those taxes are nuisance taxes of which he cannot easily identify their nature as to whether they are direct or indirect taxes.

    The betting tax brings in less than GHC50 million annually Dr Ato Forson posited, pointing out that therefore such a tax, if scrapped, cannot significantly affect the country’s fiscal position.

    Also, he explained that, the introduction of the E-levy fights the cashless economy agenda successive governments have tended to pursue. Therefore, the E-levy will be abolished in first budget within the 120 days of the social contract announced by President John Dramani Mahama as promised he said.

    In support of the stance of the minister designate, former Director-General of the National Lottery Authority (NLA), Sammy Awuku, has expressed his excitement over the government’s decision to scrap the betting tax. The current Member of Parliament for Akuapem North on the NPP ticket described it as a counterproductive measure that has failed to yield positive results in other jurisdictions.

    “I’m excited that the betting tax is going to be scrapped,” Awuku stated during an interview last week. “I’ve been consistent about it, even during the NPP era, and I said it is something that personally has not worked in many of the jurisdictions anytime you have introduced taxes on betting.”

    Further expatiating his reasons for his position against the betting tax, the former NLA director said, “Lottery was part of the betting tax. The National Lottery Authority, for instance, is owned by the government, and apart from the things that they do, at the end of the day, they must also contribute to the national kitty” he explained.

    This, he argued, created an unfair advantage for illegal betting operators, as players were more likely to choose operators who did not levy taxes on winnings.

    “If the government is taxing itself, then what will happen is that the underground operators that we call the illegal operators will become emboldened,” Awuku continued. “If you play with the government, you attract a 10% tax on what you win. But if you play with the illegals, you get

    your full money. So, I told them that, for me, it was counterproductive.”

    Awuku also expressed concern over the initial stance of the Finance Minister-designate, who had previously advocated for an outright ban on betting and lottery activities. “

    Meanwhile, the Member of Parliament for Tano North, Dr Gideon Boako, is cautioning the Mahama government against introducing alternative taxes in disguise following the resolve to scrap the e-levy and betting taxes, emphasising the potential implications of such a policy shift. Dr Boako believes it could result in significant revenue shortfalls that the government would struggle to address, arguing that, such shortfalls would conflict with the requirements of the International Monetary Fund (IMF), which demands robust revenue generation to meet debt servicing obligations.

    “I think by and large, he [Ato Forson] has done his part, but unfortunately, it wasn’t enough,” Dr Boako stated. “For instance, he was asked how he plans to make up for the revenue shortfalls from scrapping the taxes, and he said he would cut expenditure. However, cutting expenditure does not address the problem because the IMF focuses on debt service to revenue ratio, not debt service to expenditure ratio,” he said.

    The former economic advisor to the at the vice president office further explained that while expenditure cuts might offer temporary relief, they do not resolve the fundamental issue of generating enough revenue to match debt servicing obligations.

    He warned that the IMF would ultimately insist on finding new sources of revenue, which could lead to the introduction of additional taxes.

    “We don’t want a situation where you give with the right hand and take with the left hand,” he remarked, urging policymakers to consider the long-term impact of their decisions.

    He called for a more comprehensive approach to addressing Ghana’s fiscal challenges. He cautioned against creating false hope by abolishing taxes only to replace them with alternative levies, urging the government to be transparent and pragmatic in managing the country’s revenue needs.

  • Tax concerns in Mahama’s next gov’t

    President Elect

     

    Adnan Adams Mohammed

     

    President-elect, John Dramani Mahama’s promise to cut or abolish a number of taxes in his 120days governance faces mixed concerns from the public.

     

    While other stakeholders of society uphold that, it is unrealistic for the next Mahama’s administration to cut or abolish some of the taxes; that is, e-levy, the COVID levy and the 10% levy on sportbets as it will affect the economy while affecting the moral standard of the young population. Some economists believes otherwise.

     

    An Economist, Dr Theo Acheampong has stated that there will be minimal impact on public finances when the e-levy and Covid levy are removed. In his analysis of these two taxes, he explained that together, they raised GHS3.259 billion or USD 296 million in 2023, accounting for 2.4% of total domestic revenue or 0.4% of Ghana’s 2023 Gross Domestic Product (GDP).

     

    “These two taxes can easily be scrapped. In my view, scraping them would have a limited impact on public finances but bring significant relief to many citizens and businesses,” Dr Acheampong shared on his social media handle.

     

    However, the Institute of Community Sustainability has said that sports betting threatens the well-being of Ghana’s youth. According to the Institute, the proliferation of sports betting, particularly among young people, has reached alarming proportions hence their call to the government to consider increasing the betting tax to 50% from the current 10% to curb this menace.

     

    President-elect Mahama, during the campaign towards 2024 elections promised to scrap sports betting tax and others.

     

    “First is resetting the economy for prosperity. In the first 120 days in office, we will hold a national economic dialogue to draw up a four-year fiscal consolidation plan. We would rationalize taxes, abolishing among others the obnoxious e-levy, the COVID levy and the 10% levy on bets winning.”

     

    However, a s statement issued by the Executive Director of Institutes of Community Sustainability, Eric Jerry Aidoo, said that the current state of sports betting in Ghana is worrisome. Many young people are spending an inordinate amount of time and money on betting platforms, with some staking 50% of their winnings only to lose it all again.

     

    According to the Institute, “This vicious cycle of betting and losing is not only draining the financial resources of our youth but also eroding their productivity and potential.

     

    “If left unchecked, this betting epidemic could have severe consequences for our society. Desperate individuals may resort to crime, such as robbery, to fund their betting habits. Companies may also suffer as employees squander their salaries on betting, leading to financial losses and decreased productivity.”

     

    In contrast, advanced countries have recognized the dangers of betting addiction and have established rehabilitation centers to provide support and treatment to affected individuals. Unfortunately, Ghana lacks such facilities, with only five psychiatric hospitals available, which are not even up to standard.

     

    “Increasing the betting tax to 50% would be a bold step towards addressing this issue. The revenue generated from this tax could be channeled towards establishing rehabilitation centers and providing support services for individuals struggling with betting addiction”, the Institute posited.

     

    Moreover, a higher betting tax would also serve as a deterrent to young people who are tempted to indulge in sports betting. By making betting more expensive, we can reduce its appeal and encourage our youth to seek more productive and fulfilling pursuits.

     

    Consequently, another analysts, Chief Executive Officer of Dalex Finance, Joe Jackson, raised concerns about how the incoming Mahama administration will generate revenue for development if it removes all the taxes it has promised to abolish.

     

    Jackson highlighted the significant challenges in managing the economy, particularly with the manifesto pledge to remove certain taxes, including the e-levy.

     

    “Let us not be mistaken, in 2025, we have to look at how we are performing in terms of revenue because some of the items are going to go out. There has been a manifesto commitment to take out the e-levy, betting tax, the COVID levy. So a lot of issues are going to come out and I have no doubt in my mind that the challenge is going to be huge”, Dalex CEO said during a TV conversation.

     

    “So, let’s focus on the E-levy and COVID-19 levy, two consumer taxes that irk many Ghanaians and for which both the NDC and NPP promised to do something about, besides other tax handles.