Tax policies in Ghana might be a barrier not a boon for business

06 February 2019

As Ghana looks to develop its business environment as a driver of economic growth, restrictive tax policies might be the biggest hindrance to growth for businesses in the country, according to Kofi Frempong-Kore a Tax Partner at global professional services firm KPMG in Ghana. 

Frempong-Kore was speaking at a meeting in the Ghanaian-German Economic Association in Accra late last month, and argued that the current revenue policies might be hindering the government’s policy objectives rather than facilitating progress therein. THe GETFund, NHIL Levys and the Luxury Vehicle Levy are among the policies he denounces.

Ghana’s revenue policy has been the matter of much debate in recent times, given that the Ghana Revenue Authority found a deficit of nearly $400 million in between its expected level of revenue collection and the actual funds collected. McKinsey & Company has been helping the organisation with solving these issues.

Tax policies in Ghana might be a barrier not a boon for business

According to Frempong-Kore, the government must focus its energy on promoting overall economic growth in the country, which is currently being slowed down due to considerably high costs of doing business brought about by policies such as the decoupling of the GETFund and NHIL Levy from VAT.

“Some businesses are still struggling to adapt their systems to cater for the change against the backdrop of the cost of implementation. Cost of living has increased for the average Ghanaian as the change in the law has brought about increase in the cost of goods and services,” he said. 

The luxury tax is another area in which the KPMG Ghana Tax Partner identified problems, particularly as they hinder growth in what is perhaps one of Ghana’s most lucrative sectors – that of luxury hospitality. The country currently accounts for the largest share of leisure tourism on the continent.

The transport sector – closely linked to the hospitality and tourism sectors – has also taken a hit from the luxury tax. “This cost has consequently been passed on to consumers. Individuals are likely to use the services of unregistered transport businesses as their cost is expected to be cheaper,” said Frempong-Kore.

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Technology is essential to simplifying the tax compliance process in Nigeria

03 April 2019

Despite increasing pressure on public coffers and the expanding need for tax collection, inefficiency and a lack of user-friendly mechanisms are posing a major barrier to paying taxes in Nigeria, according to Head of Tax at global professional services firm PwC Nigeria Taiwo Oyedele. He posits technology as the solution to this problem.

As one of the largest economies in Africa, Nigeria is increasingly progressing towards higher degrees of economic prosperity, although the government is struggling to benefit from this growth in the current scenario. According to Oyedele, the country’s “revenue to GDP ratio” is at the lowest end of the global spectrum.

Oyedele attributes this high rate of default to the difficulty that Nigerian citizens face in paying their taxes, something that is simultaneously acting as a barrier to other government efforts to solve the problem. “It is a contradiction: you need tax money but you make the process very difficult,” he says.

Currently, the use of digital applications to pay taxes is among the payment options. Oyedele recommends that technology should be made the sole avenue through which tax is collected and administered, thereby making the process of calculation, payment, and filing for returns more efficient.

Technology is essential to simplifying the tax compliance process in Nigeria

In addition, using technology is expected to reduce the costs of paying taxes in the long run, due to what Oyedele terms as “cost of compliance.” “It is actually the money the taxpayer pays that doesn’t get to the government. So, both the taxpayer and the government have an objective to reduce that cost,” he said. 

Oyedele was speaking at the Tax Academy Clinic, and urged tax authorities in the country to enforce reforms in the system. These would be over and above the reforms introduced under the previous Minister of Finance, who initiated the Voluntary Assets and Income Declaration to reduce default rates.

Technology is the key according to Oyedele, and he pledged that PwC would support in the process of integration. “In the past, getting your tax clearance certificate used to be like rocket science.When you need it to buy a plot of land or get a contract, getting the TCC is difficult. With technology now, one should be able to get that immediately,” he said.

“We know that these platforms are not perfect yet; so, our role as PwC, helping so many people to pay their taxes and also paying taxes ourselves, is that once we identify what the problems are, we get the stakeholders to come together to see how we can fix the problems,” he added.