The advent of the COVID-19 pandemic forced the hand of the government of Ghana to cut taxes and also substantially increase expenditure in both the health and social sectors ostensibly to protect businesses, lives and livelihoods.
This narrative has occasioned ballooned debts, deepened financing gap, deteriorated fiscal deficit among others. Fortunately, the emergence of the Vaccines coupled with how resilient Ghanaians have been in the combat against the virus – low death rate, low hospitalization etc. – has given the government hope that the economy can be opened in phases as we inch towards the end of the pandemic.
Lives and business operations are gradually returning to normalcy and it’s imperative that government roll back policies and programs initiated at the abnormal period and introduce others that will help speed up economic recovery. Specifically, the government is no longer giving free water, free electricity, free meals, COVID-19 related business stimulus package partly because people are no longer under lockdown and economic activities are gradually scaling up.
Among the measure being taken to revert the COVID-19 induced damages to the economic fundamentals and speed up economic recovery is the introduction of new revenue measures like the 1% VAT on Fuel.
It is instructive to note that the strategy to tax the rich to raise enough funds to aid the recovery process is not peculiar to Ghana.
On 23 December 2020, the Kenyan President assented to the Tax Law Amendment Act (No. 2) of 2020 (the Act). The Act amends the Income Tax Act and the Value Added Tax (VAT) Act of Kenya.
The key amendments made through the Act include the reinstatement of (i) the resident corporate income tax rate to 30% from 25%; and (ii) the highest individual income tax band to 30% from the 25%. Additionally, the VAT rate was reinstated to 16% from 14% through a legal notice in accordance with the law. These rate changes became effective on 1 January 2021.
In South Africa, Finance Minister Tito Mboweni outlined new tax brackets for personal income taxpayers in his Budget speech 2021 on Wednesday (24 February). The personal income tax brackets were increased by 5%, which is more than inflation.
In July 2020, the citizens of Egypt started paying a 1% Corona tax on all salaries. According to the government, the tax is meant for containing the pandemic.
In August 2020, the Lagos State, Nigeria introduced new taxes for Ride-Sharing Companies to raise money in an economy devastated by COVID-19.
There are dozen more African Countries that have introduced taxes to enhance domestic revenue mobilization to revert the havoc rocked in their economies by COVID-19. In the context of Ghana, the government has done this without overburdening the citizens.
One thing that is striking in the taxes proposed in the 2021 budget is the direct benefits that would be accrued to the ordinary Ghanaian in the short to medium term. For instance, the COVID-19 HEALTH LEVY has a job creation component through the recruitment of more health care professionals in the short term and the establishment of fourteen (14) medical waste treatment facilities across the country for safe disposal of medical waste in collaboration with the private sector. Also, the construction of 111 Hospitals and Infectious Disease Centers will create massive jobs for non-health professionals.
It worth noting that the government has also paid considerable attention to giving more reliefs to the vulnerable and the worse affected persons and organizations in this COVID-19 era.
Such tax reliefs include:
•Suspension of Vehicle income tax for commercial public transports, popularly called trotros and taxis to reduce the cost of transportation.
•Suspension of income tax stamp payments for Small businesses.
•30% corporate income tax relief to hotels, restaurants, education, arts and entertainment, and travel and tours sectors
•A waiver of penalty and interest on accumulated tax arrears up to December 2020 to reduce cash flow challenges will also target companies and individuals.
Ghana and Nigeria are the only countries in Africa that have given additional tax incentives to its citizens for the 2021 fiscal year.
It is instructive to note, that the government of Ghana has tactfully balanced its revenue measures – taxes reliefs and new taxes – in a manner that promotes social mobility and shared prosperity
In the short to medium term, these revenue measures and other strategies of the government will sustain businesses, create jobs, improve living conditions and fortify our health delivering the system to better position Ghana to deal vigorously with a future health crisis and economic shocks.
Written by Charles Opoku -Eastern Regional TESCON Coordinator.
Source: Mybrytfmonline.com/Obed Ansah
