Indirect taxes widen inequality gap – Prof. Bokpin

An Economist and Professor of Finance at the University of Ghana Business School, Professor Godfred Bokpin, says the continuous introduction of indirect taxes on the citizenry widened the inequality gap in the country.

According to him, indirect taxes like the proposed E-Levy among others amassed little revenue for the government while burdening the ‘poor’ in society, unlike direct taxes which were more progressive to spur development.

Speaking at a multi-stakeholder forum on the latest “Commitment to Reducing Inequality (CRI)” index report in Accra yesterday, Prof. Bokpin called for robust reforms in Ghana’s taxing regime to reduce inequality and poverty by increasing corporate tax, reducing exemptions and making other income and wealth taxes more progressive among the population.

The 2021CRI ranked Ghana 3rd in West Africa on its commitment to tackling inequality, but scored 20th and 121 in Africa and globally.

Of 158 countries globally, the CRI measured governments on three pillars; public spending (mostly on education, healthcare and social protection), taxation and labor rights, where there is strong evidence that government could improve to curb inequality.

Analyzing other sectors including agriculture, the country’s debt burden and the role of international financial institutions, the report found that government spending in agriculture was lowest across the sub-region (1.4 percent of annual budget) although a majority of the population survived from the sector.

Professor Bokpin who presented highlights of the report, said although Ghana had “progressive tax policies on paper,” it had a low tax to Gross Domestic Product (GDP) ratio mainly because of ineffective tax collection, widespread exemption from the tax net and tax-dodging.

“This is why I do not support indirect taxes like the E-Levy which is before us now because the more indirect taxes you impose, the more the poor suffers and it is the reason why you find that there are limited economic opportunities in this country and yet, Ghanaians are unable to take advantage because the average Ghanaian just cannot save enough".

All over the world, governments that made it, did so through direct taxes and that is more progressive to raise funds for the country and this is the way we must go,” he stated.

The economist suggested that government as soon as possible increase corporate income tax to 30 percent, restore the top personal income tax rate to 35 percent, introduce a wealth tax and make gift tax applicable to inheritances.

“We need to design an effective and context-specific property taxation strategy. Property taxation, a form of wealth tax, presents an excellent opportunity to make up the gaps created from COVID-19 but as it stands, measures to tax the sector is very weak, not well enforced and unpopular among politicians,” he noted.

The Co-chair of the Civil Society Organisation (CSO) Platform on Sustainable Development Goals (SDGs), Beauty Emefa Nartey, in a remark underscored the need for government to take robust steps in reducing inequality across the country.

“Issues of inequality are crucial to leaving no one behind as stipulated by the SDGs and we must be deliberate at tackling it because when inequality deepens, we all bear the brunt,” she said.

Organized by SEND-Ghana, a non-governmental organization, in collaboration with OXFAM, the forum had in attendance, representatives from the field of academia, government agencies, private sector, CSOs among others.