Ghana’s tax exemptions are causing more harm to the economy than good, Group Chief Executive Officer of Ideal Financial Holdings Dr. Nii Kotei Dzani has said.
Foreign companies who operate in some regions of the country enjoy a tax-free status while others enjoy holidays for up to 10 years.
After the initial five-year tax holiday period, agro-processing enterprises which use local agricultural raw materials as their main inputs have corporate tax rates fixed according to their location — with those situated outside the regional capitals and the Northern, Upper East and West Regions paying no tax at all.
The Free Zones Act 504 provides tax holiday of 10 years for companies operating in areas demarcated as Free Zones. Thereafter, corporate tax is paid at a rate not above 8 percent.
This, Dr. Dzani said, must stop: “Government should take a second look at the tax regime in these times. It was very important in the 50s and 60s because we didn’t have the capacity or technical knowhow, but now we have some of the best economists and scientists in this country so we cannot continue to implement those models”.
While the tax-breaks go to help the foreign firms that enjoy them, they do not help local companies interested in growth and sustainability of the economy.
“We are still granting tax exemptions to foreign companies when the local industries don’t get any quality relief in their own country. The government should remove the reliefs,” he stated.
Dr. Dzani is of the view that when these exemptions are removed there should be a new policy providing specific economic interventions.
“For example, if gold prices are falling and mining companies are going to lay-off workers, then as a government you can reduce their taxes so that they can remain in business. But most of these companies come into the country and enjoy tax exemptions even when they are making super-normal profits; however, when prices fall then they lay-off workers, mostly Ghanaians.”
He said local companies are not calling for exceptional treatment but want government to provide a level playing field for everyone, whether local or foreign.
“When everyone is given the same playing field then we can compete equally. As a businessman who has businesses in other parts of the world we compete with the locals, which is even difficult because the locals there are given incentives.
“But when it comes to our country the incentives are rather targetted at the foreigners, leaving the local ones short-changed. It is about time we stop this.”