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Opinions of Saturday, 16 March 2019

Columnist: atinkaonline.com

Scrap obnoxious tax on luxury cars now!

It is an undeniable fact for a country to succeed in its developmental agenda, a lot will depend on its ability to raise enough resource to be able to meet the needs of the people.

Many African and third world countries have been depending on the income from the export of their natural resources and the benevolence of the Western World and at times, from loans from the international financial institutions better known as Bretton Woods’s institutions.

The loan facilities have always come with their own conditionalities, which in most cases, have never favoured the borrower.

In order to raise enough funds to meet the demands of her people, Ghana has been introducing taxes, all aimed at mobilizing resources to build the country.

It was in this vein that the government last year introduced what is now known as the luxury vehicle tax to make owners of the luxury cars to pay more taxes to the state.

On paper, there seemed to be nothing wrong with this type of tax as it is normal that if one could afford to buy a luxurious vehicle, it should not be a bother to that person to pay something small to the state in order to use it on the road.

Per the new tax, vehicles with engine capacities of 3.0 – 3.5 litres attract an annual tax of GHC 1,000.00; those with engine capacities of 3.6 – 4.0 litres pay GHC1,500.00 annually; while 4.1 litres and above pay an annual tax of GHC2000.00.

Commercial vehicles were however exempted from this tax.

Complaints

Notwithstanding the intention of the introduction of the tax, a lot of Ghanaians did not approve of it and believed that it was insensitive on the part of the government to introduce targeted at the rich.

Also caught in the web were other private sector operators such as importers, haulage trucks owners and manufacturers.

During one of the their zonal meetings in Kumasi last year, a member of the Association of Ghana Industries told the gathering that as way of avoiding ‘the nuisance’tax, he has changed the number plate of his van used for transporting his goods to a commercial plate.



And that seemed to have worked as no question was asked even though his vehicle fell within the tax zone and he only paid the yearly income tax for such vehicles.

According to them, already the private sector, especially the industries were suffering from tax burden and were of the view that this luxury tax was unnecessary.

This same tax in addition to others have also compelled car and spare parts dealers to hit the streets to call on government to reserve the tax and give the private sector some respite.

According to them, due to the introduction of the tax, more than 5,000 of such vehicles have been parked in garages as people are not willing to buy them and those importers who borrowed money from the banks to import the vehicles are unable to pay back the loans and are being harassed.

Effects

The resultant effects of this tax is possible collapse of the business of those into the import and sales of luxurious vehicles.

This could also aggravate the current unemployment level in the country as many more people would be rendered jobless in eventual collapse of the businesses. Even though not all of the employees in this sector pay tax to the government, the tax they pay on the services and goods they consume daily.

The tax the importers also pay of the goods and services would also be lost to the government thereby defeating the purpose of the introduction of the tax.

It would also scare away who intend to enter into similar business.

It is unclear how much the government has been able to raise from the introduction of this tax since August last year. But the fact remains that more people are crying and calling for its abolition. Just like the tax on the importation of mobile phone which was introduced by the former government and had to be withdrawn as it was not defeating the government’s effort to bridge the digital divide, it is high time the government took a second look at this obnoxious tax and abolish it and find other innovative ways of collecting or widening the tax net to raise more revenue to undertake its developmental projects.

The vehicle luxury tax must be scrapped and the time to do it is now.