Business News of Wednesday, 20 February 2013

Source: B&FT

Gov’t lacks will to boost informal taxes

Past and current governments in Ghana lack the will and commitment to generate revenue internally – especially from the informal sector- because they are lazy, business and financial analyst Sydney Casely-Hayford has said.

Governments have rather relied extensively on donor funding when they ought to have developed strategies to rake in revenue from the large informal sector.

Mr. Hayford was answering questions from participants at an economic forum held by the Ghanaian-German Economic Association (GGEA) in Accra.

The forum was under the theme Ghana’s Economic Prospects for 2013 and beyond”. Participant, drawn from the private and public sectors, were concerned about government’s inability to widen the tax-net and rope-in the informal sector.

“The only reason why government has been unable to tax or formalize the informal sector is because government is lazy; there is no other reason,” said Mr. Hayford.

He said every year stakeholders meet government at economic discussion forums where the topic always comes up and is thoroughly discussed, but the latter always backs down, saying “it’s a huge task”.

He said the first government that is able to address the issue will see itself with a surplus of income and revenue, which would be used to finance development projects.

Explaining further, Mr. Casely-Hayford mentioned coconut selling and commercial driving as two sources of revenue which have been left untapped.

“Coconuts now sell at GHC1 each and the seller loads his track with at least 100 coconuts. He makes GHC 100 from every trolley he sells, but he buys in bulk in Agbogbloshie at 40 pesewas per coconut and pays GHC 5 daily for the track which conveys the coconuts,” he said.

“Cocoanut sellers make 50.5 pesewas on each coconut, and so for every 100 coconuts sold a profit GHC 55 is made. Even if they sell for 20 days in a month, they are making GHC 1,110 every month, tax free.

In another anecdote, Mr. Hayford told participants that taxi drivers pay their owners GHC 25 every day, so any extra goes to the drivers.

“On the average, he is able to make GHC60 a day, tax free, into his pocket; he doesn’t pay insurance or any license fee because his master takes care of that. If a taxi driver operates like that for 25 days in a month, he makes GHC 1,500 tax free.

“Even without counting, one cap put the number of taxis in Accra at about amount a minimum of 100,000, so then we are looking at billion of cedis.”

He said there are many other commercial services which when properly taxed would bring in at least GHC 4 billion more into government kitty “and we would not need donor funding.”