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 ghanabusinessnews.com 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.

How Ghanaians abroad are building the national economy with remittances

By Emmanuel K. Dogbevi

Remittances from Ghanaians living abroad have become a very important component of Ghana’s economy.

By sending money home to relatives to cater for the sick, pay for education, acquire landed property and feed households, Ghanaians living abroad are building and sustaining the country’s economy.

The importance of remittances from Ghanaians abroad can be seen in the fact that it has outstripped even Overseas Development Assistance (ODA) or international aid.

Notwithstanding the fact that international aid is an important source of external finance for the government budget, the amount remitted into the country is above the total amount of ODA, consisting of loans and grants from donors.

Many of Ghana’s donors having realised that all non-income Millennium Development Goals (MDGs) are likely to be missed, scaled-up their ODA to Ghana in recent years. ODA now accounts for about 42% of the national budget.

In 2009, the Bank of Ghana reports 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).

There are over 500,000 Ghanaians living in the UK alone, the British High Commission in Accra has said, and according to the World Bank, there are 111,000 Ghanaians living in the US, making Ghana the fourth country with the highest number of its citizens living in the US after Nigeria, 211,000, Ethiopia, 140,000 and Egypt, 133,000.about 1000 Ghanaian doctors living and working in the US.

There are Ghanaians living and working almost in every corner of the world in various capacities who send money home to their relatives.

In 2010, remittances or private unrequited transfers (net) in the year amounted to $2.12 billion, the World Bank Ghana Country office told ghanabusinessnews.com. And that amount exceeds the total volume of ODA that the country received in that year.

According to figures provided to ghanabusinessnews.com by the Public Relations Office of the Ministry of Finance and Economic Planning, 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.

Remittance receipts in general, according to a joint publication by the World Bank (WB) and the African Development Bank (AfDB) titled, ‘Leveraging Migration for Africa’, generate large benefits for emigrants’ countries of origin.

“At the macro level, remittances tend to be more stable than other sources of foreign exchange; their variation is often countercyclical, helping sustain consumption and investment during downturns; and they improve sovereign creditworthiness, by increasing the level and stability of foreign exchange receipts,” it says.

At the micro level, it adds, both country studies and cross-country analyses have shown that remittances reduce poverty. They also spur spending on health and education, as a result of both higher household incomes and—according to some studies—the devotion of a larger share of remittances than other income sources to these services.

In addition, the study indicates that remittances provide insurance against adverse shocks by diversifying the sources of household income. For example, a recent study finds that Ethiopian households that receive international remittances are less likely than other households to sell their productive assets, such as livestock, to cope with food shortages.

According to the Migrations Factbook 2011, published by the World Bank, the stock of Ghanaian emigrants in 2010 was 824,900 and the stock of emigrants as percentage of population was 3.4%.

And it listed the following countries as top destinations for Ghanaians; Nigeria, Cote d’Ivoire, the US, UK, Burkina Faso, Italy, Togo, Germany, Canada and Liberia.

On skilled emigration for 2000, the Factbook states that the emigration rate of tertiary-educated Ghanaians was 46.9% of the population, 924 or 37.1% of physicians trained in the country, 1,639 or 55.9% of physicians born in the country. The number of nurses that left the country was 4,766 or 24.1% of nurses born in the country.

The WB, AfDB study says many migrants transfer funds to households in origin countries for the purpose of investment. “Data from household surveys reveal that households receiving international remittances from OECD countries have been making productive investments in land purchases, building houses, businesses, improving the farm, agricultural equipment and other investments (36 percent in Burkina Faso, 55 percent in Kenya, 57 percent in Nigeria, 15 percent in Senegal, and 20 percent in Uganda; figure 4.3). Households receiving transfers from other African migrants in other African countries set up small-scale businesses, such as restaurants and beauty salons. They also invest in housing.”

The study also shows that the African diaspora has invested in service sector activities, such as import/export companies, telecommunications, and tourism and transport companies (examples include Databank, in Ghana; Geometric Power Limited, in Nigeria; Teylium, in Senegal; and Celtel, in Sudan).

It cited the results of a survey of 302 returnees conducted in 2001 which indicates that more than half of Ghanaian and 23 percent of Ivorian returnees reported returning with more than $5,000 in savings (Black and Castaldo 2007). Both studies indicate that many return migrants invest in business activity and that work experience and the maintenance of communication with friends and family while abroad facilitates the opening a business upon return.

Cassini (2005) concludes, according to the study, that the most successful Ghana-based businesses of Ghanaian migrants were owned by migrants who visited home frequently and developed social networks.