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Tax exemption: Close to $12m approved for 3 coys


Adnan Adams Mohammed

A total of almost US$12 million (11,753,021.88) has been approved as tax exemptions for three companies by Parliament, last week.

The breakdown of the amount is as follows: US$11,441,638.32 to B5 Plus Limited under Government’s One District One Factory (1D1F) Initiative. US$311,383.56 to Cascade Development Company Limited and the Gold Coast Resorts International Limited.

The approval followed the Finance of Committee Parliament’s recommendation to the House to approve Government’s request with regard to the tax waivers to the company. The request was laid in the House on Thursday, 10th June, 2021 by the Minister responsible for Parliamentary Affairs Osei Kyei-Mensah-Bonsu on behalf of the Minister for Finance in accordance with Article 174(2) of the Constitution and referred to the Finance Committee for report in pursuant to the Standing Orders of the House.

“The tax waivers for the 1D1F programmes are aimed at creating jobs for Ghanaians through the setting up of factories and industries which will in turn move the country towards greater industrialisation”, Chairman of the Committee Kwaku Kwarteng presenting its report said.

“The initiative will create massive employment particularly for the youth in the affected communities, thereby improving income levels and standard of living as well as promote exports and increase foreign exchange earnings to support the government’s development agenda.”

Article 174 (2) of the Constitution empowers the legislative body to confer power on any person or authority to waive or vary a tax imposed by an Act of Parliament. The exercise of any such power conferred on any person or authority to waive or vary a tax in favour of any person or authority is by the said provisions, made subject to the approval of Parliament by resolution.

In accord, the Ranking member of the Committee Cassiel Ato Forson seconding the motion said the tax waivers will help change the nature of the economy from one dependent on import and export of raw material to one focused on manufacturing, value addition and export of processed goods.

Consequently, the MP for Adaklu, Governs Kwame Agbodza in his contribution entreated the House as part of its oversight responsibility to undertake monitoring visits to companies granted tax exemptions to ensure that the tax waivers granted are not misapplied.

The tax waivers for B5 Plus are in the areas of Import Duties, GET Fund Levy, Import NHIL, Import VAT and EXIM Levy on materials, plants, machinery and equipment or parts to be imported under the implementation of the 1D1F programme. 

Also, the exemptions for the other two companies ( ) are same range of taxes  on materials and vehicles to be procured in the redevelopment of the Accra Race Course including a five-star hotel, shopping mall, office and residential buildings 

B5 Plus is a local company operating under the Government’s One District One Factory (1D1F) Policy which is designed to promote industrialisation, boost investments and create jobs in the country. 

Ghana’s tax regime provides a wide range of exemptions and incentives, designed to achieve specific social and economic objectives, such as promoting investment and employment in certain industries, sectors or geographic regions, encouraging rural development, or reducing the tax burden on certain economic sectors and income groups. 

Apparently, these exemptions approval comes at a time many economists and tax experts are against the tax exemption regime in Ghana. 

A number of studies on Ghana’s tax exemptions regime have concluded that the growth in tax exemptions and reliefs are not only unsustainable, but the benefits to the economy from some of these exemptions and reliefs are doubtful. Not only do some of the tax exemptions provide the opportunity for abuse, they also deny the country of the much needed revenue, resulting in low revenue mobilization. 

In a clear case scenario, in 2016, the Ministry of Finance intensified its oversight in an effort to limit the use of special permits that exempt imports from custom duties and VAT. Cabinet also amended the process for approving exemptions to include compulsory clearance by the Ministry. Despite these positive steps, total exemptions stood at GH¢2.26 billion as 

at end 2016, representing close to 10% 

increase from the previous year’s exemptions of GH¢2.06 billion. In 2017, total tax exemptions amounted to GH¢2.57 billion, representing nearly half (47%) the total import duty collected for the year.

In contrast to the rapid growth of expenditure, tax revenue in Ghana has remained very low as a share of GDP over the years due to the country’s tax-expenditure regime, including a wide range of exemptions and various forms of preferential tax treatment, concessions and low compliance. The continuous rise of tax exemptions impacts negatively on how much the government mobilizes as revenue to the state as captured in a Survey of the Ghanaian Tax System by the Ministry of Finance and the Ghana Revenue Authority with the support of Foreign, Commonwealth and Development Office (FCDO) in collaboration with the Institute for Fiscal Studies (IFS). 

The Institute of Fiscal Policy, an advocate for the urgent passage of the Ghana Tax Exemptions Bill, in a policy brief indicated that, the Exemptions Bill introduced in Parliament by the Government in March 2019 was a bold and commendable step towards addressing the excesses of the country’s overgenerous exemptions regime. 

“This is an important intervention in an era of fiscal rigidity, underpinned by mounting expenditure, persistently underperforming domestic revenue mobilization, and dwindling external aid support.”

However, the fiscal policy think-tank noted that, “the Bill needs to be strengthened, particularly by defining an exemption properly and comprehensively. It will also require that other exemptions in the tax code need to be re-examined for their effectiveness and value for money, and to see what potential revenue savings could be made by adjusting them. Reducing the range and cost of exemptions will help increase revenues and strengthen fiscal and macroeconomic stability.”

“We therefore urge Parliament to consider passing the Bill expeditiously, subject to the proposed amendments contained in this document.”

Meanwhile, submitting proposals for effective tax exemptions regime in Ghana, Eric Mensah, top official at Ghana Revenue Authority, in an interview suggested a review all legislation on tax incentives to minimize revenue leakages; one central body to monitor administration and use of tax incentives; tax administration must undertake impact analysis of 

the various tax incentive legislations with a view to repealing those that are retrogressive; and develop a system for withdrawal of incentives for non compliance with conditions

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