Ghana’s economy is set to slow for the fourth consecutive year, according to African Development Bank statistics, but the government has nonetheless imposed new taxes and raised taxes on gasoline.
“The question is: Can consumers support new taxes at a time when their income is reduced?” asked Godfred Bokpin, economist and lecturer at the University of Ghana.
The key cocoa industry, which generates about one-third of the country’s exports, has seen production decline by 40 percent over the past three years.
While growth is still forecast at 3.4 percent in 2015, it is down from 4.2 percent in the previous year.
The International Monetary Fund (IMF) on Wednesday announced a loan of $114.6 million to the Ghanaian government on Jan. 13, but that came with conditions, including a demand for fiscal consolidation.
“With government debt continuing to increase and financing remaining a challenge, the 2016 budget rightly aims at a stronger consolidation than originally envisaged,” the IMF said in a statement after announcing the loan.
To implement IMF policy, the government passed the Income Tax Act, 2015 on Sept. 1, which added a number of new taxes that may pressure Ghanaians in the poor economic climate.
The new taxes are to yield additional revenue equivalent to 0.3 per cent of GDP, according to government estimates.
There are quite a few new taxes, including a 1 percent tax on interest income, whether from bank deposits or investments. Capital gains tax has been raised to 25 percent from 15 percent.
Ghanaians who earn income abroad will now be taxed on the full amount at home – previously only income earned in the country was taxed.
Mortgage interest charges will be deductible only for one building owned by the taxpayer – previously all mortgage charges could be taken off taxes.
Fees paid to lecturers and board members will also be taxed at 10 percent, and the corporate tax on manufacturing was raised to 75 percent, although it remained at 25 percent for other sectors.
On top of all these new taxes, Ghanaians were slapped with an 18 to 27 percent tax increase in petroleum products on the first working day of 2016. Gasoline now sells at GHS 3.464 ($0.90) per litre, up from GHS 2.661 ($0.70).
And, in December 2015, Ghanaians were slapped with increases in water and electricity tariffs. Water went up by 59.2% while electricity went up by 67.2%. The increase was approved by the Public Utilities Regulatory Commission.
But economist Bokpin warned of the dangers new taxes could bring, as Ghanaians have a low savings rate. “When you impose additional taxes, you are squeezing both companies and individuals. There is a real risk that they may not have sufficient funds left for living expenses,” Bokpin warned.
Organised labour has announced it will embark on a nationwide strike from Jan. 22 as part of a series of actions planned to protest the increments.