Finance minister, Ken Ofori-Atta
Taxes are good. No government can survive without taxes, it seems. The changing taste of society puts serious economic pressures on governments to provide amenities for its citizens. As time changes, the desire of the people changes, and so does the responsibility of the government. The wishes of the governed migrate from one stage of desire to another.
Society is not done with its sophistication yet. The need to provide employment for the teaming youth, coupled with the need to ensure the continuous existence of a safe business environment to ensure that business not only thrive, but grow in an expansive sequence is a non-negotiable duty, burden even, on the often restrained government.
In fact, the more time passes, the more previous, and sometimes current, amenities become outdated and outmoded, requiring the government to follow trends and provide the citizens with their ever changing tastes. The government is never done providing, and the people are never done demanding. Then comes funding.
Every step by the government to meet the demands of the people requires a corresponding need to fund. Mostly, the desired progress of the people and the government are inhibited by the limited, if not unavailable, funds required to propagate the dreams of the government and the governed. The proceeds from natural resources alone are not enough, taxes are a sine qua non.
However, over-reliance on taxes as a means to fund public spendings, if left unchecked, can cripple the desired economic growth. Sometimes, excessive resort to taxation as a means of raising public funds produces the inverse of the desired result, worst even. It is not out of place for economics experts to constantly warn governments against the temptation of overburdening its citizens with excessive taxes.
In fact, H.E. Dr. Mahamudu Bawumia in 2015, the well known economist, before assuming office as vice president of Ghana in 2016, whilst addressing the issue of taxation under the then NDC government, and in a post made on twitter, made the observation on the issue in the following words:
“NDC has resorted to increasing taxes under the economic difficulties they created. An NPP Government will do differently.” Dr. Mahamadu Bawumia (as he then was) in a twitter post dated 2nd December, 2015 at 12:21PM
On Wednesday the 17th day of November, 2021, Ghana's Finance Minister appeared before the parliament of Ghana to present the budget, which was dubbed the “Agyenkwa budget”, for the 2022 fiscal year. The budget was received with mixed reactions from Ghanaians.
Whereas some members believed that budget to be in the right direction, others believed that the budget would deepen the financial woes of the ordinary Ghanaian. In fact, contrary to the name given to the budget, a section of Ghanaians, made up of mostly members of the opposition political party, believed the budget is intended to create woes for, rather to save, the ordinary Ghanaians.
It therefore did not come as a surprise when the members of parliament from the two major political parties in Ghana, the NPP and the NDC, were sharply divided on the approval of the budget. So heated was the disagreement along the political lines that when the budget came for approval on Friday 26th November, 2021, the majority (NPP) had to stage a walkout in parliament which led to the unanimous rejection of the budget by the minority (NDC).
Even so, the rejection has created chaos among the intelligentsia, mostly those within the legal fraternity, as to the constitutionality or otherwise of the rejection. This however is not the main focus of this write up.
Key to the content of the budget was the issue of taxes. Whereas the government sought to abolish some taxes, such as the collection of road tolls, it also sought to either introduce new taxes or cancel some tax exemption that were hitherto enjoyed by stakeholders.
The public outcry, it seems, is centered on the consequential effect of the new taxes on the prices of commodities. For example, some drivers have threatened to embark on a strike to register their displeasure at the rate at which taxes on fuel have increased fuel prices. The increment in fuel prices, they say, has led to a massive reduction in their profits as almost all their proceeds from their work go into the purchase of fuel.
One is therefore tempted to ask; What therefore is the aim of the government for the introduction of the new taxes?
As intimated earlier, the government has cancelled some taxes. However, the taxes introduced seem to overshadow the taxes sought to be abolished especially when one considers the net effect of the taxes.
One of the justifications for the proposed taxes is to ensure that more persons are brought into the tax web, thereby creating a larger pool of taxable persons in order to increase the revenue generated by and for the government via tax. It is argued, quite strenuously, that less than 40% of Ghanaians eligible for the payment of taxes actually pay tax.
In a publication dated 6th January, 2021 by pulse.com.gh, it was stated that out of the six million eligible Ghanaian taxpayers, only 1.5 million pay taxes according to a research conducted by the Ghana Anti-Corruption Coalition (GACC), (find the article athttps://www.pulse.com.gh/business/only-15-million-ghanaians-pay-tax/rrs0j2y). I cannot vouch for the credibility of this research. Of course, there is a likely aorta of truth in it. The argument goes further to point out that the few number of persons caught by the tax web is overburdened, especially when the government has had to rely on them to fund exorbitant projects.
I believe the discussion should go beyond the number of people paying taxes. It should, rather, veer into the question of "why are less people paying taxes?". By this, an attempt is made, first, to ascertain the reason(s) behind a few people paying taxes. Upon reaching the reason, an attempt can then be made at resolving the problem from the roots.
The solution may not lie in "how do we compel more people to pay taxes" in its simple form, as has been portrayed by the leading arguments in support of the increased taxes contained in the budget before parliament. The restriction of the focus into getting more people to pay taxes will, not only mislead us, but will blind us from dealing appropriately with the canker that seems to be seeping into our finances, and our economy generally.
The question, I think, should be "why are people UNABLE to pay taxes?". Nobody can avoid the payment of indirect taxes- that is to say taxes on goods and services consumed by the citizens. With this in mind, one can safely assume that the kind of taxes that are mostly avoided by the majority of the tax paying class are the direct taxes. In effect, the government's plaints centre mostly on the non-payment of direct taxes.
If the above is true, then I believe it is not remote to think that the main reason for the non payment of taxes, direct taxes if you call it, is either because;
1. People are unemployed, hence unable to pay taxes, OR
2. People are not properly employed OR
3. The tax net is so porous that tax avoidance does not just look attractive,
but easy.
The main problem of this country, which has birthed the need to resort to taxes, is unemployment. Unless we commit ourselves into solving the unemployment canker, the taxing menace will never end. It will grow into a cycle that will keep coming back at us in different forms, but with the same discomfort.
SUGGESTED STRATEGY TO ADDRESS THE ISSUE
1. Grant transparent tax incentives to businesses to increase employment: One of the main justification for the increase in taxes is the excuse that less people are paying taxes as compared to those who ought to pay taxes. In fact, the report is that less than 10% of Ghana’s population pay tax to the government. The reason for this is not far from a guess.
The rate of unemployment in the country continues to rise, whilst job opportunities keep declining each year. This has created a gap between the available jobs and the available labour. The pressure on the government continues to mount. However, where more people are employed, the available persons within the taxable net will increase.
Other things being equal, taxes will increase. If the right step is not taken towards creating a more accommodating environment for businesses to thrive, the few employed people will continue to suffer on the sharp edge of this taxing scheme. Private business employment seems to be the way forward, especially where the finance minister has made it clear that the government pay roll is presently full.
The proper way, I suggest, is to give transparent irresistible tax exemptions or incentives to businesses that are able to employ a certain high number of persons, and pay them above a minimum salary determined by the government. These businesses are likely to thrive, employ more people and pay them good salaries which will, in effect, create revenue for the government through the taxing of the incomes of those employed.
This, apart from motivating businesses to employ more people, will create revenue for the government. This approach will better yield the desired result if done with more transparency, especially where there usually are issues of distrust among the populace as to the manner in which tax incentives are awarded to some individuals and companies. The accusations normally centre on the fact that these incentives are usually given to political faithful or persons and businesses with political connections.
2. Tackle the issue of corruption and unnecessary abandonment of expensive projects to avoid “leakages”: Among the problems that keeps creating the need to tax the people more is the unnecessary siphoning of public funds, overspending and the abandonment of government projects even after huge sums of monies have been expended on them.
Ghana continues to suffer the menace of corruption, especially among persons occupying positions of trust in the government. An example comes to mind. After securing a loan facility for the construction of affordable housing units for Ghanaians, it was later revealed that the government actually paid sums far in excess of the actual works done on the project. This is in reference to Ghana’s notorious Saglemi Housing saga, an issue that still remains unresolved. It is reported that the contractor in charge of the said project was paid the amount of $179million for a $64million work done.
Even after such huge sums have been expended on the project, all the housing units so far built sit in the Bush uncompleted and unoccupied. These are the leakages that create the financial vacuum which occasionally require that the government goes to the already burdened few people within the tax net to tax them even more. More recently, it was also reported that 2 multi million projects initiated by the government have been abandoned at the Asueyi gas production plant, injuring the public funds whilst we keep looking for strategies to tax the people more and, in most cases, borrow money from the international market to fund projects.
The repayment of these loans together with their inevitable interests will be funded through taxation of the citizens. The leakages seem to be more, and increasingly so. I am not oblivious of the government's intended commitment to protect the public funds. However, if more is not done towards the realisation of this promise, our economic progress as a nation will be stalled and thwarted by the greedy and inconsiderate few.
3. Ensure that the taxes paid by the citizens reflect in their lives and living conditions: Anybody who pays taxes is pretty much aware of the benefits of paying taxes. Once the taxes are used to improve upon the living conditions of Ghanaians, it will be less likely for them to deliberately refuse to pay taxes or look for loopholes in the laws to avoid tax payments.
People will always find means to avoid the payment of taxes by minimising their tax obligations. However, where the taxpayer is committed to paying his taxes but sees no reflection of the taxes paid in their lives, they are more likely to avoid the payment of taxes. There is therefore the need for the construction of the appropriate legal framework to ensure that taxes paid by the citizens are utilised to their benefits. This will not only motivate the people to pay their taxes but will also deter corrupt officials from siphoning proceeds of taxes out of the national coffers.
CONCLUSION
The goal is to address the issue of taxation in the most apolitical way possible. The desire is simple; to keep the government machinery running without choking the people in whose interest the government machinery must be kept running. Government needs funding, but the people need to live.
They need to survive. The responsibility of the people to the government need not be shirked. However, the people need the government to free, not chase, them. The responsibility of the government to the people is dual; a sword and a shield. The people must be in a position to use the government as a sword to fight social problems and as a shield against exploitation of any form. This, I believe, is the ultimate goal.