- Ghana loses GHȼ4.6 billion to tax expenditures in 2023
- Import exemptions dominate, accounting for 76.76% of total
- Parliamentary exemptions total GHȼ1.7 billion, sparking concerns
Ghana’s Finance Ministry has revealed that the country lost GHȼ4.6 billion to tax expenditures in 2023, marking a 4.2% decline from the GHȼ4.8 billion recorded in 2022. While this decrease suggests a modest improvement, concerns persist regarding the nation’s fiscal health and revenue mobilization efforts, particularly in light of substantial import waivers.
Tax Expenditures Breakdown
Tax expenditures refer to revenues forgone due to preferential tax treatments. In 2023, import exemptions accounted for GHȼ3.545 billion, or 76.76% of the total. Domestic indirect tax exemptions totaled GHȼ809 million, while domestic direct tax exemptions reached GHȼ264.02 million. Notably, import exemptions have increased steadily, from GHȼ2.46 billion in 2021 to GHȼ3.545 billion in 2023.
Parliamentary Exemptions Under Scrutiny
Parliamentary exemptions, granted under parliamentary resolutions, cover various public and publicly guaranteed projects, as well as benefits for Members of Parliament (MPs) and Council of State members. In 2023, these exemptions included:
- GHȼ1.3 billion for mining companies
- GHȼ460 million for grant-funded projects
- GHȼ40.9 million for the One District One Factory (1D1F) program
- GHȼ3.9 million for MPs and Council of State members’ vehicle tax waivers
The World Bank has urged Ghana to rationalize its import duty waivers, warning that excessive exemptions erode the country’s revenue base. The NDC Minority in the 8th Parliament also resisted certain waivers, arguing that they disproportionately benefit a select few while undermining public finances.
A Sign of Progress?
Despite the rising value of import exemptions, their share of total tax revenue has declined, from 5.74% in 2018 to 3.14% in 2023. The Finance Ministry attributes this to a more streamlined exemption regime, fewer project-related disbursements, and improved revenue collection. However, tax expenditures remain a significant drain on public funds, and the government must balance offering incentives to attract investment with preserving vital revenue streams.
