IEA lauds govt for proposed ” MoMo” tax

The Director of Research of the Institute of Economic Affairs (IEA), Dr John Kwakye has described as laudable the proposed taxing of profits made by the telecommunication companies from mobile money (MoMo) transactions.

However, he cautioned that strict regulations should be put in place to ensure that the telecommunication companies do not pass the taxes on to the consumers who are already burdened with taxes.

According to him, the imposition of additional taxes on the “booming sectors” including the telecommunications, mining and banking, was one of the ways the government could increase revenue for national development.

 “It must be pointed out that this is not a call for a blanket increase in corporate taxes which is high. Here, it is just a call for a selective taxation of super-profit making companies to support national development” he said.

Dr Kwakye was responding to a question on the proposed momo tax at a press conference on the 2020 budget statement and economic policy organised by the IEA in Accra yesterday.

The taxing of momo profits was proposed by the Minister of Communications , Mrs Ursula Owusu-Ekuful who argued that ‘telco’ operators  generated some GH¢71 million monthly on the transactions, yet that money remains untaxed.

The proposal has not gone down well with Ghanaians including financial analyst, Sydney Casely-Hayford who is of the view that the move would overstrain the telecommunication sector.

In the 2020 budget, the government is eyeing total Revenue and Grants of GH¢67.1 billion, representing 16.9 per cent of Gross Domestic Product (GDP). This is up from a projected outrun for 2019 of Ghc54.6 billion (15.8 per cent of GPD)

Of the total expected revenue for the period, GHc 65.8 billion is projected to be from domestic revenue, representing an annual growth of 22.5 percent over the projected outturn for 2019.

However, according to the IEA, the government’s plan to support the Ghana Revenue Authority (GRA) through largely tax administration to achieve this was not sufficient as the reforms would not rake in better outcomes.

Instead, Dr Kwakye suggested bolder steps including reduction of the tax exemptions through the passage of the tax exemptions bill, reduction of tax losses through corruption, illicit flows and other leakages.

For him,  the country could make trillions of cedis from it natural resources for various project by signing contracts that provided maximum benefits instead of ceding mining rights to foreigners for pittance.

According to Dr Kwakye, the revenue limitations could constrain the 2020 expenditure of GHc85.9 billion which represented 21.6 percent of GDP.

 He said although there was an attempt to make up for the large deficit in infrastructure spending- having spent more on human capital development- the allocation for infrastructure   may not be enough.

The economist therefore advised that the government fulfilled its promise to uphold expenditure control and do same with public debt to prevent the unhealthy trajectory it was heading towards.

For the IEA “the revenue, capital expenditure and growth targets are not sufficiently ambitious” as they could deliver only incremental outcomes in the economy and not optimal socio-economic development.


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