Tax Consultant and Attorney, Ali Nakyea and Associates is advising government to deal with the tax exemptions regime as that can open up the tax base and widen the tax net.

This it believes will lead to increase in domestic revenue mobilization.

In a comprehensive review of the tax policies in the 2021 Budget, Ali Nakyea and Associates said capturing of taxpayers in an economy like Ghana does not automatically widen the tax net as many do not comply with tax payment.

“In our economy, capturing of taxpayers does not automatically widen the tax net as most are merely noncompliant taxpayers that the enforcement mechanism has to necessarily catch up with. The key step in widening our tax net is dealing with the tax exemptions regime as that can open up the tax base hence widening the tax net and leading to increased domestic revenue mobilisation.”

The report revealed that “expenditure rationalization is necessary considering the challenges of the procurement system. The value for money approach is thus in order and most welcome for implementation with constant monitoring.”

This year’s budget is anchored on fiscal consolidation, amid the impact of covid-19 on government finances.

Covid-19 levy

And in a bid to contain the coronavirus pandemic, government announced covid-19 levy. The tax firm believes the levy will surely have an impact on businesses.

“This is surely going to have an impact on businesses since the NHIL is going to increase from 2.5% to 3.5%, and the VAT Flat Rate from 3% to 4%. The severity of the impact is the fact that the two are not recover[1]able by the taxpayer as a deduction from output VAT as was the case under the VAT credit system, hence the tendency to pass it on to consumers by way of an increase in prices.”

“The recommendation we offer is this, if these increases should remain and have less impact on businesses and price levels for consumers, then it is prudent to make the NHIL together with GETFund Levy recoverable as they used to be under the credit system”, it pointed out.

Energy Sector Recovery Levy

On the Energy Sector Recovery Levy, it said together with the Special Petroleum Tax are necessary to help address the energy debt and revive the economy.

However, is noted that “the question is whether we can hold on to it this time around and not succumb to pressures from the impact, as it is a necessary levy and tax for the revival of the economy”.

Financial Sector Levy

Due to the financial sector clean-up, government spent about GH¢21 billion to clean the sector.

This compelled it to introduce a 5.0% profit before tax on banks earnings.

But Ali-Nakyea and Associates says the banks are already overburden with the 5.0% Fiscal Stabilization Levy.

Other tax measures

Regarding other revenue measures, it welcomed the increases in road tolls and the gaming policy, saying, it is long overdue.

On road tolls, it said “this is another welcome policy as reviews are necessary. The only concern is the application of the revenue raised for their intended purposes as it is surprising to see the road just before and right after some toll booths being the worse segment of some roads. There is thus the need for proper monitoring and accountability of revenue raised and expended in this area”.

Regarding gaming policy, it said it is also another area the nation’s digitalisation agenda should cover to ensure tracking and tracing of online betting, among others.

However, the Ghana Revenue Authority unit handling the taxing of the digital economy needs to be involved in the policy planning, design and implementation

It also welcomed the various tax rebates in this pandemic period.

They included provision of a rebate of 30 percent on the income tax due for companies in hotels and restaurants, education, arts & entertainment, and travel and tours for the second, third and fourth quarters of 2021 and the suspension of quarterly income tax instalment payments for the second, third and fourth quarters of 2021 for small businesses using the income tax stamp system.