Except for the fact that this issue gives me sleepless nights, I would not have pieced my opinion on same. Not only I am naturally, undisposed towards arousing controversies, more so, my first articles of the year, is usually not conveyed in an argumentative structure neither does it take the nature of argumentation. Nevertheless, given the mental distress this issue continue to give me, I have left with no option than to break my own convention, much to the dismay of own writing standard.
While I do this, I want to sincerely render a caveat that I am no near the experiences and expertise of persons who have argued in favour of tax reduction/scrapping in some sectors of the economy. Although the protocol of any argumentative piece requires that I take a position either in favour or against a motion, the position I take here is a purely common sense-based and does not proceed from the abundance of or an accumulation of theoretical and practical knowledge in Finance or Economics management. While I envy persons with this background, I have clearly no doubt that my background in communications does not make me deficient to share an opinion on this issue. I have come to understand that, communications allows a person to argue from context when they know less or next to nothing about content or substance of subject matter.
It is this that keeps intelligent journalists on top of issues even though they are not repository of all knowledge and wisdom. To that extent, I will look forward to your comments as same will assist me to either maintain my current position on this issue or to consign same into the can of ignorance.
I have, over these weeks, taken religious interest in the work of the vetting committee, an interest which is borne out of a strong humility to learn while assessing the sincerity of some of the political promises that featured conspicuously throughout the campaign season.
Like myself, anyone who has taken keen and apt attention and interest in the deliberations of the committees, will have been familiar with statements to the effect that some taxes, being nuisance, will be scrapped. Indeed, whiles some nominees have had to retract or backtrack on some of statements they have made in the heat of political campaigns, the issue on the need to scrap nuisance taxes is one that has enjoyed harmonious chorus from all the nominees, whose designated positions have warranted that they took questions on taxes. If my memory still serve the purposes for which it was created for, then I recall that the Senior Minister, Minister for Finance, Minister for Aviation, Minister of Tourism and Minister of Trade and Industry, have all taken turns to vehemently argue in support of the argument that once some taxes are scrapped, the private sector, which is to re-engineer and play a lead role in the development agenda of the one month old, H.E Nana Addo-Danquah Akufu Addo led administration, will have the financial space to employ more of the teeming unemployed graduates.
Ideally, this strategy should not and cannot, at the very least, be a subject of contention. Indeed, I am the last person to oppose any arrangement that will support the private sector to not only optimise its output but most importantly, lead the charge on helping to reduce the menace of youth unemployment.
What I am unable to understand is the nexus between tax reduction and the propensity of private businesses to increase persons on their payroll or improve the conditions of its existing employees. In my estimation, this strategy, in its current state, does not clearly establishes the link between the view that once some taxes are taken from some private business, that will necessarily translate into employment or better service conditions for workers. If a link existed, then it is not one that is visible, readily.
It is trite knowledge that no private business man operates a business with the view to providing employment. In fact, businesses exist ultimately to increase profits or worse still break even while keeping the financial wheels of entrepreneurs rolling. Indeed, while employees are the cogs in the wheels of businesses, it is a veiled fact that no business is created for the ends of employment. Rather, employees serve as the means by which the ultimate aim of a business is actualised. If this is true then it will follow that even the financial space that tax exemptions will provide to businesses, may not translate into having them increase the numbers on their employment roll or provide better incentives for many financially unsatisfying jobs. If the purposes for reducing taxes are to increase the propensity for business to employ more, then i do not think the current proposed approach is by itself sufficient.
Once the proposed taxes regime does not provide a bridge between tax reduction and employment creation, we cannot be certain about achieving the intent and purpose for the proposed tax scrapping in some sectors of the economy. I shudder to argue that by reducing taxes in this mode, the government will essentially cede its control over substantial financial resources to private people, who cannot be compelled to necessarily reduce unemployment rate in the country.
To this extent, I think the government will lose substantial degree of control over the resources that it can marshal to undertake its responsibility in the area of employment. Yes, while I agree that governments cannot do businesses and should not be in business, the fact that people look up to the government as the ultimate employer is equally not lost on me and I do not think that, given the fact that the previous elections was principally fought on employment, this fact will equally be lost on this government.
Permit me to argue further that our current financial position and standing is not one that allows us the luxury of declaring some finances, especially when it comes from our major sources of revenue, as nuisance. With all due respect, i do not believe there are nuisance taxes. To the extent that taxes are the mainstay of our internally generated funds and given the plummeting performances of some of foreign exchange earning commodities, we cannot take any money for granted, less call same as nuisance. Even when we are able to rope in the informal sector into the tax net, I don’t think such exercise should mean that we will still not expand taxes for the purposes increasing our current financial position.
Currently, it is my understanding that our debt to GDP ratio stands at a whopping 73%. Besides , our budget deficits (revenue-expense differential) sits at 9%.Worse still unemployment, according to the World Bank, is at 48%, amidst a number of scary and yet to disclose public sector debts. Personally, I do not think, if I am saddled with this level of debts, I can throw away any stream of my income.
If I won’t do it under my current limited financial state, then I will not support my government to do same.
At the risk of appearing to argue from the public sector point of view, I don’t think any private business can thrive when the fiscal situation in the public sector is challenged. This has been very much evident in the way our governments, have had to crowd out the private sector, on the bond or capital markets. I submit that the strength of the private sector is intrinsically linked to the strength of the public sector and once liquidation challenges begins to take its toll on the public purse, the private sector, however the tax exemptions, will still suffocate.
Finally, I want in all respect argue that once some businesses in some sectors are given tax-reductions, it will open the flood gate for others to crave for same. This will appear discriminatory and can itself lead to apathy among businesses.
While I agree and accept without reservation that the government should create an enabling environment for the private sector to grow, I don’t think that same should be done at the expense of our already strangulating public finances.
It is my considered view that government uses its purchasing power and leverage to support the private sector rather than scrap taxes.
Rather than reduce taxes, I will recommend that the government pursue vigorous public sector reforms to rid it of some corrupt elements whose activities poses major operational challenges to the private sector. To me, once, we don’t reduce the bureaucracies in our public sector, the scrapping or reduction in taxes, will still not deliver the financial freedom that private businesses require to create more employment.
It is my understanding that the energy sector, which is the fulcrum of businesses is saddled with over $2.2 billion debt and the current power situation, may be compromised with time. To me, we have to use this taxes to explore ways of preventing the resurgence of power outages, which was diagnosed as a financial issue and which can have far more damming repercussions on businesses.
Even if taxes are to be scrapped, the government should do same on condition that those businesses will provide corresponding employment to the teeming masses. To me, scrapping taxes should not be an industry oriented strategy but it should be a merit-driven initiative. Thus, business, which can clearly demonstrate or provide prove of how they can create more employment with reduction in their taxes, must be rewarded with rebates.
Without belaboring the point, I want to agree with the Senior Minister that taxes are the function of time and given our current stake of public debts and budget deficits, the last thing we should pursue is to give tax rebate across board, one that does not clearly link to employment and better conditions for the Ghanaian worker.
Besides, I don’t want my government to lose its financial leverage and control..Robert Kawasaki and Donald Trump, in their book, warns against that…
Samuel Osarfo Boateng.
I am not a spectator….Because I believe that:
When we vote, we surrender our political sovereignty to a political entity. Once we keep quiet after voting, we surrender our intellectual capacity, as well!!!
Awaiting your comments..