Former Finance Minister Seth Terkper has questioned the feasibility of Vice President Mahamudu Bawumia’s tax amnesty proposal calling it “unrealistic.”
This comes after the New Patriotic Party (NPP) flagbearer assured all businesses and individuals of tax amnesty in 2025 if he wins the December 2024 presidential elections.
According to Dr Bawumia, this is to ensure all businesses start on a clean slate before introducing his proposed flat tax rate system.
However, speaking on JoyNews, Mr Terkper said there is a purpose behind taxation stating the amnesty “is attractive but unrealistic.”
The former Finance Minister said a flat tax rate could complicate the system and affect tax equity of fairness.
Citing Excise Tax as an example, he stated that those are punitive, and questioned whether the Dr Bawumia was planning to make them a flat rate as well.
“So are you saying that if I have my small car and I go and buy petrol and if it’s 4 cylinders or two cylinders, should I pay the same as the person with V8, V6 and the rest who are the governors and pollute the environment more?” he quizzed.
“Because excise is designed to be punitive, that is why it’s on alcohol, petroleum and tobacco which are meant to be injurious and harmful products. So again what are you going to make flat about this? A single rate?”
Additionally, the former Finance Minister explained that the income tax system is based on the principle of equity, which means that those who earn more should pay more.
Mr Tekper stated that the top marginal tax rate that is applied to the highest earners was increased by the current government from 25% to 35%.
“It may sound attractive but the flat rate will undermine what we call the equity of fairness of the tax which is a very important principle which states that the more you earn, the more you must pay towards the development of the country,” he said.
Mr Tekper also accused the current administration of causing the tax system to become needlessly complex.
He criticised the introduction of the VAT flat rate scheme, which he said, made the tax system more complex.
“It was this same administration that removed Get fund and NHIL from the VAT and made it straight levies which added the complexity because businesses had to file separately for VAT and file separately for straight levy, the two straight levies and then they were denied input tax credit or refund which was a characteristic of the VAT.”
Why Flat Tax
According to Dr Bawumia, Ghana’s current tax structure is not fit for purpose. He called for a change that would increase competitiveness.
He argues it’s about time Ghana becomes competitive like other countries like Estonia.
He made this known at an engagement with the Ghana National Chamber of Commerce and Industry.
“In 2025, we are going to grant a tax amnesty to all businesses and individuals and start afresh. We are going to start a new system – a flat tax system; so we are going to wipe the slate clean for every individual and every business and Ghana is going to start a new tax system – a flat tax system as we have in Estonia”.
“In addition, we are going to do faceless audits. Officials should not come to businesses to do audits. With the digital framework, we should have the information and audit facelessly,” Dr Bawumia added.
Source: Myjoyonline.com
