Stop promising tax cuts in election years-ILAPI to parties
Policy think tank Institute for Liberty and Policy Innovation (ILAPI) has admonished political parties promising tax cuts due to their quest to win power to stop.
Executive Director of the think tank, Bismark Peter Kwofie opines that such acts only lead to borrowing and excessive public debt.
In a statement issued by him, he said ”As much as we believe in tax cut for economic freedom and business expansion, Ghana’s tax cut pledges often happen during elections for electoral votes. These tax cuts, exemptions and abolishment are not backed by science and data and instead become a burden on the government leading to more borrowing.”
Read the full statement below
Institute for Liberty and Policy Innovation (ILAPI)
15th September, 2020.
Stop the tax cut for electoral votes; it is leading to more borrowing and Public debt
As the general elections approach, the two main political parties (NDC and NPP) have launched their manifestos with uncountable promises of creating prosperity.
It looks tax cut; exemptions and abolishment have been a competitive component of the manifestos. In 2016, the NPP manifesto promised abolishing 6 taxes, tax exemption for “kayayei” at the district level and cutting down 3 taxes to spur private sector growth and employment creation. At the end of the 4 years, the government has abolished/reduced 15 different taxes.
The NDC in its 2020 manifesto is also promising granting tax holidays for start-ups, 7 tax exemptions, tax cut on corporate income tax and other tax incentives for private sector growth and employment.
This time in 2020, the NPP government is reducing tax on digital devices, tax exemption on “prospecting and reconnaissance by mining firms from VAT and other taxes, to incentivize investment in exploration activities” and removing import duty on sanitary pads.
Though the government has removed and cut taxes to reduce tax burden to improve business climate, the biggest challenge is finding the funds to finance the abolished taxes and tax cuts. In order to finance the tax cuts and abolished taxes and because only few Ghanaians pay direct taxes, the next available option is to borrow more from both the domestic and international financial markets to meet the revenue deficits. This led to the issuances of Euro Bonds of $2 billion worth of dual-tranche Eurobonds with 10- and 30-year maturities and $3 Billion in 2020 and borrowing from China on the Sinohydro “Barter” deal.
As much as we believe in tax cut for economic freedom and business expansion, Ghana’s tax cut pledges often happen during elections for electoral votes. These tax cuts, exemptions and abolishment are not backed by science and data and instead become a burden on the government leading to more borrowing.
It is therefore imperative to stop the politics of tax cut and exemptions for votes. It is increasing Ghana’s debt, causing fiscal challenge and equally not achieving the policy intent.