TPAG take on Tax Exemptions Review Directives

Withdraw Unlawful And Counterproductive Directive On Review Of Import Duty Exemptions

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Taxpayers’ Alliance Ghana has noted with worry recent publications in the media about the Finance Ministry’s decision to review all import duty/tax exemptions.

Taxpayers’ Alliance GhanaIn a statement issued by the Ghana Revenue Authority (GRA) to reinforce the Finance Minister’s position during the 2017 budget reading, all applicants who qualify for exemptions from import duties and taxes are required to make prior payments and after, make a claim for refund of the amount paid. This directive raises critical questions bothering on legality and propriety given government’s own assurance that it will implement policies to boost investments in order to prop the economy.

Indisputably, the tax exemption regime has been grossly abused over the years leading to colossal shortfalls in tax revenue for the state, therefore, any lawful and holistic review coupled with a thorough plugging of the loopholes that has led to such wanton abuses will be a commendable one.

However, TPAG considers the current arrangement to cure the irregularities inherent in the exemption regime as palpably flawed. To start with, the review has no legal basis and, or is crafted to usurp the powers vested in the parliament of Ghana. Article 174 of the 1992 constitution of Ghana expressly states;

“(1) No taxation shall be imposed otherwise than by or under the authority of an Act of Parliament. (2) where and Act, enacted in accordance with clause (1) of this article, confers power on any person or authority to waive or vary a tax imposed by that Act, the exercise of the power of waiver or variation, in favour of any person or authority, shall be subject to the prior approval of Parliament by a resolution”.

Clearly, the move by the Ministry of Finance and the Ghana Revenue Authority (GRA) is tantamount to a breach of the law and due process. Under what law or authority is this review being implemented? Why is Parliament silent on the actions directing compliance with the directive and how the GRA is arrogating to itself powers that are exclusive to Parliament?

Again, our concern is that the review in its current form will strangle the finances of beneficiary companies under the exemption policy. The request for companies to pay the equivalent of the tax waiver on goods that qualify under the regime and later apply for a refund is a debilitating circus that will lock up capital with implications on time value of money even if refund is successful over time.

Moreover, for TPAG, the review provides a fertile ground for corruption that will further drain the state of needed revenue to fix the challenges in the economy. It is estimated that in 2016 fiscal year alone, over GHC 1.2 billion was lost by the state arising out of complicity and collusion between some Custom officials and some companies.

This amount could be halved if a pragmatic and honest strategy is devised through the use of modern technology which will essentially reduce opportunities for negotiated settlements and manual handling of clearing procedures at the ports. TPAG is also aware that the biggest culprits in the menace of import exemption abuses are politicians who use their power and political capital to circumvent the rules and dubiously clear goods without paying import charges under circumstances where those good do not qualify for exemptions, raping the state they profess to serve.

TPAG will welcome any lawful review by Parliament which has the power to vary these exemptions so as to reduce or completely stop the abuses of the import exemption protocols at Ghana’s ports. Corruption of the system should not result in unlawful and punitive curative measures that have the tendency to adversely affect genuine beneficiaries. Let us also place on record that the ports of Ghana are corruption havens with Tema harbour alone losing $8 million monthly to corrupt practices. Cumulatively, corruption at Tema, Takoradi, Kotoka, and other points of entry to Ghana runs into several millions of dollars. If corruption at these places is nip in the bud, there will be no need for such knee jerk actions being pursued with reference to import exemptions at the ports.

TPAG will stand with the business community in our avowed attempt to promote free market principles which thrive on our core values of Lower Taxes, Taxpayer Rights within an atmosphere of accountability.

Source: Taxpayers’ Alliance Ghana