Officer of the GIPC, Yofi Grant
Accra, Ghana//-Ghana Investments Promotion Centre (GIPC) could factor the United Nations Sustainable Development Goals (SDGs) into its investment reforms in the country
The Chief Executive of GIPC, Yofi Grant who disclosed this at the sidelines of the Centre’s CEO’s Breakfast Meeting in Accra, said attention would be given to investors who enable the country to achieve the SDGs.
“At the GIPC, one of the suggestions that we are making in our reforms is that perhaps we should actually move away from strategic investor to another tier called responsible sustainable investor where we are suggesting that we should only apply incentives to foreign direct investors who enable us to achieve the SDGs”.
He added that incentives would also be given to responsible sustainable investors who partner with local people to grow.
Other categories of investments which are useful to the Ghanaian economy and bring high value to the economy would enjoy incentives as well, according to him.
“It is a way of saying well, we will give you but you (the investor) should also give us something to make sure that there is mutuality in the application of taxes”.
Abuses of tax exemptions
Mr Grant admitted: “While we recognize the import of tax exemptions, we also realize that there have been a lot of abuses of tax exemptions. Even though, it is not more than 5% of the total tax revenue, but it is still important”.
As it is now through tax reforms, and new direction of tax administration, government has moved away from tax exemptions to tax expenditure.
“At the end of the day, clearly any tax exemption and rebate must be planted in law. And if there is no law that enables that it means that you have to find another way to make sure that it works”, Mr Grant told journalists.
Market brings investors
“We do recognize that most investors want some sort of incentives but global literature will tell you that it is not incentives that bring investors, it is the market.
And most of the time, incentives work when you are looking at efficiency seeking foreign direct investments (FDIs) where you compare one location to the other in producing high technical stuffs”.
But for the general marketing seeking and resource seeking investor, incentives are not as important. What is important is the opportunity and the ability to grow their business, he explained.
So, we need to take a step back and make sure that we can use whatever incentives believe we can give”.
Not reaching out
He noted that the fact that Ghana’s tax to GDP is only 12.5% shows that “we are not reaching the broader constituents of taxpayers”.
“We hear a lot of people saying that we have been overtaxed. But if you have a tax rate of 12.5% to GDP while our peers are at over 20% to GDP, then you know that you are not collecting enough taxes”.
For instance, people don’t realize how important it is to pay tax. You have someone who employs a driver, a cook, a garden boy and others and pays them with cash. And they are not taxed. So, they are outside the tax net.
There are a lot of people too whose businesses are informal and they are very mobile and so they are outside the tax net.
So the registration of everybody biometrically or digitally will mean that the revenue authority will know the people and how to get them to contribute to the development of their country by making sure that they pay the appropriate taxes.
“As we ask government to be responsible in spending, we also as citizens need to pay our taxes. In some countries, the law is harsh on people who don’t pay taxes.
Because taxes are the only way that government makes or gets money for development projects and the running of government machinery.
The rest of it is from the private sector. Private sector generates the incomes that government taxes and those taxes are used by the government for development purposes, among others”.
Impact of COVID
Speaking at the meeting, Daniel Nuor, the Head of Tax Policy Unit of the Ministry of Finance, noted that the impact of COVID-19 on the economy has exposed the structural challenges that economy faces.
The COVID-19 according to him has further highlighted the need for government to look inward and evaluate the country’s domestic revenue mobilization efforts if “we want to sustain the progress we made pre-COVID-19”.
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