Mr Speaker, thank you for the opportunity offered me to deliver a statement on Taxation and its associated benefits to every Economy including Ghana.
Mr Speaker, taxation could be explained as the 'imposition of compulsory levies on individuals or entities by governments'. Taxes are levied on every citizens in almost every country of the world, primarily to raise revenue for government expenditure, although they serve other purposes as well.
Mr Speaker, during the 19th Century, the prevalent idea was that taxes should serve mainly to finance governments' expenditure.
In earlier times, and again today, governments have utilised taxation for other things more than for mere fiscal policies and purposes.
In modern economies, taxes continue to be the most important source of governmental revenue. Taxes differ from other sources of revenue, in that, they are compulsory levies and are unrequited-i.e., they are generally not paid in exchange for some specific things, such as a particular public service, the sale of public property, or the issuance of public debt. While taxes are presumably collected for the welfare of taxpayers as a whole, the individual taxpayer's liability is independent of any specific benefit received. Nevertheless, the payments are mostly compulsory, and the link to benefits is sometimes quite weak.
Mr Speaker, there are two main types of taxes, that is direct and indirect tax. Direct taxes are primarily taxes on natural persons (e.g. individuals), and they are typically based on the taxpayer's ability to pay as measured by income, consumption, or net wealth.
Mr Speaker, Indirect taxes are levied on the production or consumption of goods and services or transactions, including imports and exports. Examples include general and selective sales tax, value-added tax (VAT), tax on any aspect of manufacturing or production, taxes on legal transactions, and customs or import duties.
Mr Speaker, there are three main categories of taxes. Proportional, progressive, and regressive taxes. These taxes can be distin-guished by the effect they have on the distribution of income and wealth.
A proportional tax imposes the same relative burden on all taxpayers-i.e., where tax liability and income grow in equal proportion.
A progressive tax is characterized by a
more than proportional rise in the tax liability relative to the increase in income, and regressive tax is characterized by a less than proportional rise in the relative burden. Thus, progressive taxes are seen as reducing inequalities in income distribution, whereas regressive taxes can have the effect of increasing these inequalities.
History of Taxation in Ghana
Mr Speaker, in the olden days in our
traditional communities, we were told how citizens contributed gold, silver, diamond among other valuables to the authorities for the development of their various communities. Kingdoms such as Asantes, Denkyiras, Dagombas, GAs to mention just a few, collected taxes from their defeated kingdoms and subjects in the form of gold, silver and sometimes humans. In villages and typical rural communities depending upon their cultural beliefs, if a hunter kills a deer or any big animal, the right limb (leg) of the animal is given to the chief or the head of the traditional area, where the animal was killed. The chief or the traditional leader who took the limbs did not contribute anything to the hunter but yet benefited from it.
Mr. Speaker, one's failure to join
communal labour, when I was growing up in my village, was a serious offense. Communal labour can be likened to taxation in this
modern times. Giving something for the development of our communities started long ago and day in day out, there has been modifications.
Mr. Speaker, these are all examples of
how the people of old contributed to the
community and by extension, nation-
building, and we in modern societies must
embrace this participatory approach of
contributing to the development of our
nation. Taxes are used to improve our
societies and efforts must be made to capture
everybody into the tax bracket. This is
something every government has done, and
will do, because payment of taxes has been
with us overtime.
Mr Speaker, Tax reforms were introduced
in 1983 as an instrument for accelerating
growth, reducing poverty and reducing
Ghana's dependence on aid to finance
government expenditure. The critical issue
has been generating revenues using tax
instruments that are least harmful to the poor.
Tax reforms focus on the four main
components of taxes: taxes on income and
property, taxes on domestic goods and
services, international trade taxes and value-
added tax (VAT).
Mr Speaker, the government needs to
increase tax revenues, as foreign aid continue to decrease due to covid-19 and its associated global economic impact and the need to increase pro-poor spending. The tax net needs to be widened at existing tax rates to generate more tax revenues without harming the poor. However, there are significant problems that constrain the ability to improve
efficiency in tax administration and generate more revenue at existing tax rates:
The institutional structure for tax collec-
tion is weak. Low skill levels of staff means that a significant proportion of taxpayers remain outside the tax net. For instance, businesses and people in self-employment who account for over 34 per cent of the economically engaged population need to be included in the tax net.
Logistics to identify and provide
information on potential taxpayers and the source and levels of their income are lacking.
There has been slow take-off of the
automation and computerisation of the customs management system, which aims to reduce leakage in revenue.
Mr Speaker, the ability to raise revenues
from taxes, called "fiscal capacity" is a crucial aspect of the functioning of any state. Being able to tax citizens and collect revenues efficiently is a cornerstone of state formation and survival.
Secondly, greater fiscal capacity implies
greater access of the state to resources needed to provide public goods and services.
Developing countries are only able to
raise a small share of taxes. Typically, they collect between 10% to 20% of GDP. The average in high-income countries is double at
40%.
Low tax collection rates have devastating
consequences on development. This mean that governments will not be able to invest in public goods such as health, infrastructure and
education. Even the Sustainable Development Goals, which aim, among other things, to build effective, accountable and inclusive institutions at all levels, have set mobilizing revenues as a goal on its own; SDG Goal 8.
Mr Speaker, the purpose of taxes is to
provide governments with funds for spending without inflation. Taxes are used by governments for variety of purposes, some of which are:
• Funding of public infrastructure
• Development and welfare projects
• Defence expenditure
• Scientific research
• Salaries of state and government
employees
• Operation of the government
• Public transportation
• Law enforcement
• Public health
• Public education (FSHS, FTVET)
• Public utilities such as water, energy,
and waste management systems
Mr Speaker, the impact of the COVID-19 pandemic on lives and livelihoods has been devastating, with the global economy plunging into a recession in 2020 with a GDP growth of -3.1 %.
Countries around the world developed
strategies to contain and recover from the
impact of the pandemic, including vaccine
administration which have strongly supported
global economic recovery in 2021 with an
estimated growth of 3. 7% up from the -3.1 %
recorded in 2020.
Prior to the Pandemic (2017-2019),
Ghana's economy was strong and stable,
evidenced by robust growth, stable and low
inflation (single digit inflation), declining
interest rates, fiscal deficit contained within
the 5% FRA threshold, strong external
balances with positive trade balance, and
strong reserves.
Mr Speaker, we as a nation should put
our destiny into our own hands, over reliance
on donor support and loans should be
minimized.
We have to, as a matter of urgency, put
in measures to increase Domestic Resource
Mobilization so as to depend less on
borrowing and reduce debt servicing and
hence, the introduction of a new tax that will
include every citizen, the E-levy.
Looking at where we are now, Mr.
Speaker, burden sharing where every citizen
is called upon to contribute his/her quota for
national development is the answer. Mr
speaker, nation building requires the input of
every patriotic citizen.
Mr Speaker, the E-levy as proposed by
the government is expected to help increase
Ghana's tax-to-GDP ratio from approximately
12.2% in 2020 to 20% by 2024. The levy is
expected to help increase the tax-to-GDP ratio
to 16.5% in 2022 from 13.4% in 2021.
The E-levy among other things will;
• Offer Ghana the opportunity to collectively rebuild our economy by
properly managing our debt levels,
• Help address Youth unemployment (which to me is the biggest challenge
we face) with investments in entrepre-
neurship support, youth employment
via the YouStart Initiative,
• Enable government to build proper digital infrastructure and space to support
several E-platform like E-health, E-agric
etc. as well as
• Help give a massive boost to road infrastructure and maintenance.
My constituency, the Amasaman consti-
tuency which is now the third largest
constituency in terms of voter population, per
2020 voter register, has one of the poor road
networks in Greater Accra. But for the timely
intervention of H.E. the President's initiatives
in the road sector, we couldn't have boasted of
even a single tarred road. I believe with the
implementation of the E-levy, government can
have enough funds to complete and give
facelifts to road projects such as Samsam
Junction Samsam-Odumase-Mpehoseam-
Fotobi Road, Medie township roads, Agen
Kotoku-Akotoshie Road, 3 Junction-
Akramaman-Okushibeade-Mayipko Road,
Pokuase-Mayera-Osonodompe Road, 3
Junction-Abehenease- Ga Odumase Armamorley
Road, 3 Junction-Opah-Sapeiman Road, 3
Junction- Kojo Ashong Road, Macedonia
Junction-Kporbikorpe Road among others
which I cannot mention for the sake of time.
Mr Speaker, I watched a video footage of
one former President of the Republic, H.E
John Dramani Mahama's address to journalists at the Flagstaff House on Tuesday
12th January, 2016 in which he stated:
"The thing about government investment
and expenditure is that money comes
from nowhere, it comes from ourselves,
and especially you have a country where
the number of people who know that they
must pay a tax on income do not exceed
30% of the population. Almost 70% of
the population pay only indirect taxes
and so you either have to go and knock
the shop and take a daily rate and at the
end of the year we're all supposed to go
and file our taxes, and declare our
incomes and you say okay you pay 1,000
Ghana cedis, you pay 500, you pay this.
70% or more of our people don't file their
tax returns. And so the only way you can
raise money really is through the tax
system and the only way you can get
everybody to contribute, is through
indirect taxes, and indirect taxes include
like consumption of petroleum products.
And so those who consume more, if you
have a V8 and you buy more petrol, then
you're paying more tax. If you sit in a
trotro you're paying less tax because
fifteen (15) of you are in the trotro using
the same fuel. And so those are some of
the things that we're faced with. It's not
every decision that will be popular. But
what was I elected for as president, to
make decisions that are popular? If I
took popular decisions to make you
happy with me, this country will be on
the ground by now. They 're tough
decisions, I mean do I take pleasure in
imposing taxes on people as if you just
take pleasure in it?"
This can be verified from graphic online
and Joy News of January 12, 2016.
Mr Speaker, "paying taxes should be
framed as a glorious civic duty worthy of
gratitude, not a punishment for making
money" - Alain De Botton, Swiss born British
philosopher and author.
Mr Speaker, in the book of Leviticus, the
Almighty God is a divine provider, yet asked
Christians to pay tithe for the growth and
development of the church. As citizens, we
also have to pay taxes to develop our nation.
Mr Speaker, it is said in Akan that "s3
odehye3 ankoa, akoa dwane" to wit "if the
royal does not fight, the slave will run away
from the battlefield". If we do not sacrifice for
our country, those who give us loans, aids and
donations will ran away from us. Wherever
we are today, either in government or
opposition, we have a huge responsibility to
be mindful of whatever we are doing. Can we
continue to rely on aids, loans and grants?
Can we ran always to IMF for bailout and live
by their conditionalities? Let's take our
destiny into our own hands for heaven, they
say, helps those who help themselves.
Mr Speaker, I wish to appeal to Ghanaians
to appreciate the fact that the decision to charge
levies on electronic transactions is practically
the only option to generate funds locally for
development and is the only potent option to
loan acquisition.
Once again, Mr Speaker, I am most
grateful for the opportunity.
Mr Speaker, thank you for the opportunity
given me.