Dear Hon. Finance Minister (Tax Specialist)
As you prepare to present the nation’s budget for 2025, I urge you to first consider the revenue available before determining expenditure levels. A sustainable fiscal policy must prioritize revenue mobilization while ensuring efficient spending.
The need to curb excessive Tax Exemptions
My first focus is that tax exemptions must be reduced to the barest minimum to preserve national revenue. The Global Tax Expenditures Database (GTED) Report 2023 highlights the lack of transparency surrounding tax exemptions globally, with many governments failing to provide comprehensive data or evaluate the impact of tax expenditures. This means that in many cases, tax exemptions are granted without clear assessments of their economic benefits. Ghana is no exception. In 2023 alone, total tax exemptions were estimated at GHS 4.6 billion, a significant loss of potential revenue.
But, as you may be aware, a good tax system should encourage economic dynamism and growth in a more efficient way through lower tax rates on a broader tax base. Business opportunities, rather than tax planning, should be the driving force behind business and investment decisions. If investors are only coming into Ghana because of tax exemptions, it seems to me that such investors may not have the interest of our country at heart. Unfortunately, Ghana’s current selective tax exemption policies are not serving national development interests, as many multinational corporations make location decisions based on tax reliefs rather than economic opportunities. In the economic challenges we face, especially under an IMF program, Ghana needs firms and investors who will make decisions based on economic potentials and only on tax savings.
We need a deliberate reduction plan in selective preferences of tax exemptions and rather focus on lowering tax rates to boost investment and job creation. Now, let us consider exemptions granted at the port since 2020.
| 2023 | 2022 | 2021 | 2020 | |
| Beneficiaries | (GHSM) | (GHSM) | (GHSM) | (GHSM) |
| GNPC (OMC Oil Imports) | 595.59 | 364.12 | 160.23 | 178.36 |
| Gov’t, Privileged Persons & Organisations | 783.41 | 455.15 | 268.59 | 209.45 |
| Ghana Investment Promotion Centre (GIPC) | 1.18 | 88.27 | 45.70 | 31.69 |
| General Exemption Per Tariff | 35.92 | 797.40 | 514.11 | 312.99 |
| ECOWAS Exemption on Imports | 6.4 | 4.4 | 2.4 | 114.36 |
| Parliamentary Exemptions | 1,710.87 | 1,491.47 | 1,337.75 | 864.25 |
| Special Permits | – | – | 0.61 | 3.10 |
| Ghana Export Promotion-EU | 0.02 | 0.09 | 0.02 | |
| Ghana Automotive Development Policy | 14.85 | 7.43 | 1.15 | |
| AfCTA | 2.22 | 0.11 | – | – |
| Total Direct Port Exemption | 3,535.33 | 3,470.10 | 2,463.86 | 1,714.21 |
Source: GRA Annual Reports
The tax exemptions data presented in the table highlights a concerning trend of rising exemptions in Ghana. Over the four years, total direct port exemptions more than doubled from GHS 1.71 billion in 2020 to GHS 3.54 billion in 2023, demonstrating an increasing tax expenditures that erode government revenue. Parliamentary exemptions alone surged to GHS 1.71 billion in 2023, making them the largest component, which warrants greater scrutiny given the country’s economic challenges.
The Ghana National Petroleum Corporation (GNPC) also received growing exemptions for oil imports, reaching GHS 595.59 million in 2023. This raises concerns about whether such waivers are justified in the face of Ghana’s fiscal constraints. While general exemptions declined significantly in 2023, dropping from GHS 797.40 million in 2022 to GHS 35.92 million, the overall tax expenditure burden remains high. Investment-related exemptions under the Ghana Investment Promotion Centre (GIPC) saw a drastic reduction, suggesting a shift in government policy to curb excessive tax incentives granted to businesses. Similarly, ECOWAS import exemptions have been inconsistent, with a steep decline from GHS 114.36 million in 2020 to just GHS 6.4 million in 2023, which may indicate changes in regional trade policies.
Hon, I conclude with a call for reform. The 2025 budget must reflect a deliberate reduction in tax exemptions. In this regard, we must
- Eliminate unnecessary exemptions that do not directly contribute to economic growth or job creation.
- Strengthen tax transparency by ensuring that every exemption granted is subject to rigorous cost-benefit analysis. When beneficiaries cannot meet the conditions, they should refund the taxes.
- We should focus on broad-based tax reforms by lowering overall tax rates while minimizing selective exemptions.
Let us use tax exemptions sparingly and strategically to support key sectors that drive industrialization, job creation, and long-term economic stability.
I WILL CONTINUE but for now,
Yours faithfully,
By: Francis Timore Boi Esq
The writer is a Tax Consultant and a member of the Chartered Institute of Taxation Ghana.
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