Former Minister for Finance, Seth Terkper, has downplayed the flagbearer of the New Patriotic Party (NPP), Dr Mahamudu Bawumia’s proposed implementation of Flat tax rate scheme.
During the launch of the NPP’s manifesto in Takoradi, Bawumia pledged to introduce a flat-rate tax system in Ghana when he assumes presidency.
Bawumia outlined that this initiative would lower government spending by 3% of GDP, simplify tax management, and improve taxpayers’ understanding of their tax duties.
[We will] support businesses to drive and accelerate job creation by cutting 3% of GDP from government expenditure (~GH₵30 billion), and redirecting it towards private sector provision of public infrastructure and services. Using our tried and tested gold purchase programme to stabilise the currency, give businesses and industries predictability in planning, and ensure stability in input prices.
“Introduce a flat rate tax system in Ghana, like Estonia. This will simplify the tax administration by giving taxpayers visibility into their tax obligations and therefore easier to file and pay their taxes
“Complement the Flat Tax regime by using a Tax Amnesty Programme to enable industries to finance their expansion, recruit more employees, and energise economic activity.”
But taking to the X platform, Mr Terkper indicated that Bawumia’s efforts will disrupt the existing tax system and lead to a significant loss in government revenue
He added that the actual rate of the proposal could burden low-and middle-income earners.
According to him, Bawumia’s proposal will create a disincentive for investors, interfere with economic policies and negatively impact local industries.
“A] It’s been a while; we are back. This series reviews the proposal to replace the “Progressive” Personal Income Tax [PIT] regime with a “Flat” rate. It may destroy the fair tax system & result in significant loss of revenues. Follow us with the PowerPoint images that follow. It will increase the tax burden for low-and middle-income earners; reduces it for the wealthy and potentially leads to revenue shortfalls.
“The actual rate of the proposal is important since it could worsen the plight of low-income earners. Additionally, the flat tax could undermine targeted economic policies, harm local industries and discourage investment. While it is relatively simple, the flat tax fails to ensure equity or fairness. In the upcoming series, we will compare the (i) current progressive regime; (n) with the flat rate proposal,” he wrote.
A] It's been a while; we are back. This series reviews the proposal to replace the "Progressive" Personal Income Tax [PIT] regime with a "Flat" rate. It may destroy the fair tax system & result in significant loss of revenues. Follow us with the PowerPoint images that follow. pic.twitter.com/ie2CeXGrNI
— Seth E Terkper (@SethTerkper) August 29, 2024