World Bank worries about Ghana’s tax exemptions

Ghana should cut down its expenditure – Pierre Frank Laporte

World Bank gave Ghana US$430 million to fight COVID-19

Pierre Frank Laporte, the World Bank Country Director, has said, one of Ghana’s biggest problems is that, the country gives too many tax exemptions.

According to him, the only way the country can fix its debt to GDP ratio is not just by cutting expenditure, but by increasing revenue.

He told Joy News’ ‘PM Express’ show that, Ghana would first have to shirk some of its tax practices, particularly tax exemptions while increasing efficiency in tax collection.

He explained that the tax exemptions are for instance to attract more foreign investors into the country, but the empirical evidence has proven that too many tax exemptions have failed to provide the desired results.

“So, you talked about efficiency, that’s one thing, to make sure that everybody pays what they should be paying. That for instance if you look at exemptions in Ghana it’s a big problem. There are too many exemptions.

“And this is a conversation we’re having with the Ministry of Finance. Very often countries think you can give so much incentives, so much concessions, and exemptions to attract investors. But there are other ways that this can be done,” Pierre Frank Laporte stated.

He added, “Empirical evidence has shown that these incentives excessively, in the long run, don’t work.

“VAT exemptions are given to many big investors to facilitate their entry and to launch their activities. But in many countries, either you have a quick VAT refund, it’s like the investor pays his VAT and you process his refund in one month or two.

“There are other countries that do for instance, VAT deferment. You don’t pay your VAT now, you’re exempted now but down the line, the minute you start operating you’ll recover the VAT. So you will not get refunded until you go and reimburse. There are many other ways of doing it and it’s a different conversation.”

Pierre Frank Laporte, however, called on the government to also adopt property taxes.

“There are other taxes, recently we launched the Country Economic Memorandum for Ghana and for instance property taxes is one area where many places in the world are doing it. It’s a norm, it’s a standard in developing world, developing economies and why can’t Ghana do it?

“And today things are in digital transition that can speed the collection that can make sure that you capture everyone. There are many other things that can be done…” Pierre Frank Laporte stressed.