Report directs government of Ghana to review the benchmark values and tax the informal sector more to meet the country’s revenue target

PwC Ghana, a tax and advisory firm, has urged the government of Ghana to as a matter of urgency review the benchmark values and pass the tax exemption bill if it intends to meet the targetted tax revenues of the country.

Finance Minister, Ken Ofori-Atta

The firm added that the government must as well introduce strategies to rope-in the informal sector of the economy.

The provisional performance for tax revenue for the first nine months was GH¢29billion compared to a programmed amount of GH¢32.4billion a 10.4 percent shortfall of the target.

According to the PwC, this adverse performance variance accounts for about 61.9 percent of the shortfall in domestic revenues for the first nine months of the year.

PwC captured this in its post-2020 Budget analysis report.

It noted that the government expects that by the close of 2019 tax revenues will be GH¢42.4billion against a mid-year revised budgeted amount of GH¢45.6billion. This, the firm says, means that by end of the year tax revenues will have an adverse variance of GH¢3.2billion – amounting to 7.1 percent of the revised budget for the year.

PwC has, hence, called for a restructuring of the tax system to avert this ill-fate that has been a bane to the economy for some years now.

“In our view, the restructuring of the tax system should include exploring ways of broadening the tax net to include, especially, the informal sector; and a review of the current benchmark values system being operated at the ports. We also recommend that the Exemptions bill – which was introduced during the first quarter of 2019 and aimed at streamlining and sanitising the exemptions regime in Ghana – be passed into law as soon as possible,” the report said

“In addition to the above, it is our expectation that restructuring the tax system will result in the employment of technology to make the tax system more efficient and taxpayer-friendly, especially as Ghana’s ranking fell by four places to 118 in the 2019 World Bank Ease of Doing Business Report,” it added.

The report further noted that extending the Special Import Levy (SIL) to 2024 will be a thorn in the flesh of businesses, especially importers, as it will further increase the cost of imports.

“Contrary to expectations, the government has indicated in the 2020 Budget that the 2 percent SIL will be extended from its current end date of December 2019 to December 2024.”

“With the extension of the SIL by a further five years, it appears the government does not want to lose the tax revenue generated from the levy. However, this decision by the government may lead to an outcry by the business community, particularly importers, as the levy increases the cost of imports and the general cost of doing business at Ghana’s ports. The government may need to decide whether to abolish the tax on its next expiry or not assign an expiry at all should it be extended again to ensure certainty,” PwC said.

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