Economics Professor, Peter Quartey, has urged the government to use new data obtained from the re-introduced National ID system to get informal sector workers to pay taxes.
The problem of the inability of Ghana’s tax system to adequately capture artisans and other informal workers has persisted for many years.
Although the informal sector constitutes 70% of the business arena, just 2% of them pay their taxes.
Also, according to the Ghana Revenue Authority (GRA), last year, only 1.5 million of the expected six million taxpayers honoured their responsibilities, with 200,000 being from the informal sector.
In an interview with Joy Business’ Philip Nanfuri on the business edition of the PM Express on Thursday, Prof Quartey said the updated National ID project presents an opportunity to gradually rope in the informal sector into the tax net.
“You cannot reap where you have not sown…we haven’t invested into knowing where people live, what they do, how much they earn and then if we want to tax them how do we tax them? I was hoping the National Identification System that we are rolling out will gradually get most of these people into the tax net. We know where they are now. We have captured them into the database, we harmonise with other databases and then the next step will be to try and see how much they earn and then how to tax them.
“There are many people, the artisans for instance, who pay indirect taxes but don’t pay direct taxes yet they earn far in excess of 1,000 cedis…that is where the discussion has to go. That we try and rope in most of the people in the informal businesses,” he said.
The new national ID, dubbed Ghana Card, is an improvement on the previous one and meets all international standards required of such identity document.
It has been enhanced to take advantage of new technologies such as tactile elements for the blind, chip embedding technology and iris capabilities in addition to taking all 10 fingerprints of an applicant.
Review some taxes
Prof Quartey, who heads the Institute of Statistical, Social and Economic Research (ISSER) at the University of Ghana, Legon, said tax administrators must review some taxes to ensure compliance.
One of the taxes he mentioned was the Luxury Vehicle tax.
“Immediately, we need to review the Luxury Vehicle Tax component. The name itself suggests they are luxury vehicles but there a number of vehicles that are not luxury vehicles yet they attract this tax. I can mention for instance school buses that are used to pick school children from schools. They are not luxury vehicles.
“Some of the waste and water tank operators, because of the engine capacity; we also find some saloon cars that have an engine capacity of 3.0, they are not necessarily luxury vehicles. Is it luxury we want to tax or we want to tax fuel efficiency?” he asked.
The Luxury Vehicle Tax mandates vehicles with engine capacities of 3.0 – 3.5 litres will attract an annual tax of GH¢1,000; those with engine capacities of 3.6 – 4.0 litres will pay GH¢1,500 annually; while 4.1 litres and above are to an annual tax of GH¢2000.
There are indications that the Finance Minister, Ken Ofori-Atta, will review the tax in the Midyear Budget review slated for Monday, July 29, 2019, to be presented to Parliament.
Watch more in the video below.
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