A Senior Tax Partner at PwC, Abeku Gyan-Quansah has advised government to conduct an extensive impact assessment and incidence analysis before introducing or amending any portion or portions of the country’s tax regime in future.

He said such an assessments and analysis, if conducted, should be made known, to inform and educate public discourse in the advent of the introduction of any new tax.

His call was premised on the approval by Parliament of three major tax Acts last week, which is targeted at bolstering domestic revenue.

The bills are the Excise Duty and Excise Tax Stamp (Amendment) Bill, 2022, the Income Tax (Amendment) (No. 2) Bill, 2022 and the Growth and Sustainability Levy Bill, 2022.

The three tax Acts, which were passed under certificates of urgency, are projected to raise some additional GH¢4.1 billion revenue annually.

The Excise Duty (Amendment) bill, will impose 20 per cent tax on cigarettes and e-smoking devices, as well as sweetened beverages, spirits and wines, is projected to rake in about GH¢400 million, while the Income Tax (Amendment) Bill will generate about GH¢1.2 billion.

The Growth and Sustainability (Amendment) Bill, which will replace the National Fiscal Stabilisation Levy that is currently levied on companies operating in selected sectors, is also projected to raise about GH¢2.2 billion.

The three tax Acts are vital to enhancing Ghana’s desire to secure a US$3 billion bailout from the International Monetary Fund (IMF).

Following the passage of these Acts, there have been a lot of conversation on what its impact would be on businesses and consumers, with many predicting it would lead to the job cuts and collapse of businesses.

Impact assessment

In an interview with the Graphic Business, Mr Quansah regretted that the various conversations and arguments around the bills were not based on any extensive impact assessment or incidence analysis.

“I wish as a country we will do an impact assessment of every tax law before it is passed. If we already do it, then we should make it public so that it will guide the conversation around what the impact of the tax will be.

“I will recommend that the Ministry of Finance does it and makes it public and even share it with parliamentarians,” he stated.

He said these conversations would have been more informed if the government did an assessment and made the findings public.

He noted that in the case where the MoF does not do any assessment, Parliament, which is a representation of the citizens, must take it upon themselves and do these impact assessments.

Impact on businesses

Mr Quansah pointed out that when taxes are introduced or increased either by the rate of a modification in the base, all things being equal, one would expect businesses to say the amount of money they have to run their operation would reduce.

He said the profits that these businesses would have ordinarily made, they would pay dividends and then introduce part into the business.

“But if taxes are coming in to take some part of the amount, then it means they may struggle to do some kind of re investments in the business,” he stated.

He said the impact may ,however, differ stating that “if somebody produces and sells water and government introduces taxes on water, it is unlikely that you will not drink water again on account of these increases so the person may be able to just pass on the tax to the consumer.

“So the issue of reduction in re investments may not be as significant as somebody who cannot pass on the cost in entirety to consumers,” he explained.

He said this was why it was necessary to do incidence analysis as well when considering some of these taxes.

“Incidence analysis is quite complicated and rarely do you see the government do any incidence analysis whenever they are considering such new laws,” he noted.

Changes to expect

Commenting on the changes to expect with the passage of the three bills, he said the Growth and Sustainability Levy, which would replace the National Fiscal Stabilisation Levy seeks to expand the number of sectors which pay the levy from nine to 15.

“The NFSL was previously imposed on entities operating in about nine sectors but what the Growth and Sustainability Levy seeks to do is come up with 15 sectors that will attract this levy at a rate of five per cent,” he stated.

The new categories that have been added include bulk oil distributing companies, oil marketing companies, communication operators, companies that provide services in the upstream petroleum sector, companies that are registered with the Securities and Exchange Commission and electronic money issuers.

Mr Quansah explained that any company that was not part of the 15 would also be required to also pay the levy but at a rate of 2.5 per cent.

For companies in the extractive sector, they are expected to pay the levy at a rate of one per cent on their gross production which means that whether they make profit or losses in the year under review, they would still be required to pay.

With a lot of these companies having signed special agreements with the government which provides them with some security for the changes in the tax regime, Mr Quansah questioned to what extent the government could enforce this new law.

Source: Graphiconline