Minister of Finance and Economic Planning, Seth Terkper says the tax incentives and exemptions given to foreign companies have immense benefits to the country.
Responding to a study by ActionAid Ghana and ISODEC which says that ‘’Ghana loses approximately $1.2 billion in tax incentives offered foreign companies every year.”
Mr. Terkper said ‘’… we must discuss this in net terms because there is no denial also that the country is benefiting from some of these investments.’’
He said that the tax incentive and exemption issue are not just a Ghanaian or West African issue, they are a global issue.
According to him exemptions themselves are instruments for alleviation of poverty. ‘’Example when you have tax threshold in our income tax, which is an exemption they benefit the poor more because for somebody earning GHC 2000, a tax relief of about GHC 1400, means only 600 of the income will be taxed even that will taxed at the 5 percent bracket… if you compare that to somebody earning GHC 20, 000 only the GHC 1200 of that 20000 and that person earning 20000 is likely to be paying taxes of about 15 percent,’’ he stated.
‘’Another example is the VAT exemptions that we grant; VAT exemptions are on basic agricultural products, they are on education, they are on health. It is true that both the rich and the poor benefit from these exemptions including the life line for electricity and water.
But you will agree with me that the unit of consumption for somebody who has a low income has a much bigger impact than somebody who earns more,’’ he opined.
The report revealed that Ghana loses huge sums of money in taxes that could have been used to alleviate poverty, to the tune of $1.2 billion (GHz, 2.4 million) annually as a result of tax incentives to foreign and big companies operating in the country.
This figure was arrived at, having taken into consideration, the GDP base between 2012 and 2014 as well as the annual tax- expenditure.
The report also says that analysis of the percentage component of total revenues given as incentives in different categories, shows that in 2012, 41% of trade tax revenues were lost through tax exemptions compared to 28% of direct tax and VAT revenues.
But speaking on the Citi Breakfast Show, Mr. Terkper said ” exemptions you are talking about also are designed sometimes to alleviate poverty.’’
‘’There is no denial also that the country is benefiting even as we speak from some of these investment; the issue is what value addition you can make, what local content you can make to diversify the economy to enhance agricultural further…’’
He advised that we look at the tax exemption issue in broad policy terms.
By: Evans Effah/citifmonline.com/Ghana