Monday, July 8, 2013

Ghana government is visionless, clueless and exploitative

...attempt to amend Communications Service Tax shows

By Emmanuel K. Dogbevi

The Ghana government’s attempt to amend the Communications Service Tax Act clearly shows that it is clueless, visionless and intent on exploiting Ghanaians at home and abroad.

That is notwithstanding the fact that Ghanaians living abroad have become major contributors to the country’s economy.

The government after setting a 6.7% budget deficit target for 2012, overrun it to almost 100% by spending more than the revenue it generated.

The budget deficit was as a result of increased salaries, lower income taxes, utility and fuel subsidies, according to the Bank of Ghana.

After creating a deficit of nearly 12 per cent -  it seems to be looking for easy ways to make money, when it has not shown responsible stewardship of monies it is already holding. The government which is on record to be doling out money  to its cronies and financiers of the party in power the National Democratic Congress under questionable circumstances, does not seem to have the creativity and economic competence to find other reasonable sources of raising revenue.

The government in the past week sought to amend some provisions in the Communications Service Tax Act, 2008 (Act 754) to clarify the scope and coverage of the tax and include interconnection services within the tax base.

According to the government the Bill seeks to exact additional levies on international calls and data transmission, as well as address revenue losses as a result of loopholes in that Act.

The government is seeking to charge some six cents on every minute of calls originating from outside Ghana, to make up for losses close to Ghȼ45 million every month due to irregular and fraudulent activities in that sector, it says.

As the debate was going on in Parliament, the Ghana Chamber of Telecommunications warned that the cost of telecoms services could rise if the Communication Service Tax (CST) Amendment Bill currently before parliament is passed.

The bill imposes a six per cent tax in addition to the existing surcharge of six cents per minute which government collects on international calls.

“If parliament passes the CST Amendment Bill it would lead to a substantial increase in the cost of telecommunications services, if operators pass on the cost to consumers,” the Chamber said in a statement July 3, 2013.

Between June 2008 when the law became operational and December 2009, the government announced that it had raked in an amount of over GH¢114 million from the Communication Service Tax, and 20 per cent of the tax revenue was to be given to the National Youth Employment Programme (NYEP), and recent developments have shown how the NYEP is using its money.

It is unthinkable, to say the least, that the government wants to put an additional tax on calls made by people in other countries to Ghana, including mostly, Ghanaians living abroad, when they are already paying a levy.

According to the World Bank, nearly 825,000 Ghanaians are living abroad, the number could be more if undocumented migrants from the country are included and they contribute so much to the country’s economy.

It is estimated that Ghanaians living abroad sent remittances or private unrequited transfers (net) of about $2.12 billion in 2010.

Remittances from Ghanaians abroad is above the total amount of  Overseas Development Assistance (ODA), consisting of loans and grants from donors, even though, ODA accounts for about 42% of the national budget.

The Bank of Ghana reports in 2009 show that remittance inflows amounted to $1.6 billion, higher than the World Bank’s recorded $1.5 billion and almost 10 times the $114 million recorded by the International Monetary Fund (IMF).

Figures obtained by from the Ministry of Finance and Economic Planning, show that in 2010 the total amount of ODA the country received was $1.8 billion.

The breakdown as provided by the Ministry is as follows: Grants – $612 million; and Loans – $1,242 billion.

The contributions of Ghanaians abroad should be complemented by prudent and responsible financial management to derive maximum benefits for the country, increasing taxes on citizens abroad who are already supporting the economy is disingenuous – what the government must do, is to work with money transfer companies to cut their remittance charges, to make it cheaper to send money into Ghana from abroad.

A World Bank study has found that Ghana together with South Africa and Tanzania have higher remittance prices with prices averaging 19 per cent on cost of sending money to Ghana.

The World Bank attributed the high remittance prices to the limited competition in the market for cross-border payments.

“Remittance prices are even higher between African nations. South Africa, Tanzania, and Ghana are the most expensive sending countries in Africa, with prices averaging 20.7 percent, 19.7 percent, and 19 percent respectively, due to several factors including limited competition in the market for cross-border payments,”  said the World Bank’s Send Money Africa database.

Following debates in Parliament, the government has withdrawn the bill “to seek further stakeholder consultations before the House considers the amendments sought to the legislation passed in 2008,” the Ghana News Agency reported, despite the fact that it sent the bill to Parliament under a ‘Certificate of Urgency’.

The GNA citing reliable sources in the Majority caucus in Parliament also said, consideration of the bill had been put on hold owing to concerns by stakeholders that approval of the legislation would amount to double taxation of consumers who are already paying tax on every minute of talk time. That indicates that the bill would resurface and possibly passed.

But it goes to show that the Ghana government lacks vision and is clueless about how to raise money to efficiently run the economy. Taxing phone calls for now, looks like an easy and cheaper way to rake in money, which the government is more likely to mismanage, much to the disadvantage of long-suffering Ghanaians.

There are six mobile phone operators in Ghana and among them, they have about 26 million subscriptions.