Home Business Finance 70 officials holds a workshop on tax expenditure management, cost-benefit analysis

70 officials holds a workshop on tax expenditure management, cost-benefit analysis

Income Tax Amendment
Income Tax Amendment

The Ministry of Finance, in collaboration with the Addis Tax Initiative, the Council on Economic Policies, and the German Institute for Development and Sustainability, has held a three-day regional follow-up technical workshop on tax expenditures in Tema.

The workshop brought together about 70 tax officials from West African countries to discuss key aspects of tax expenditure management, communication, estimation, evaluation, and cost-benefit analysis.

It is a follow-up meeting, building on the success of the regional workshops on tax expenditures (TEs) that took place in 2022 in Lagos and Nairobi and earlier this year in Manila.

Mr George Swanzy Winful, the Director of the Revenue Policy Division at the Ministry of Finance, delivering the keynote address during the opening ceremony, said tax expenditures were a global phenomenon that could not be ignored, as every country had one expenditure or another, which might be in the form of tax exclusions, exemptions, deductions, credits, deferrals, or preferential tax rates.

He added that tax expenditures were therefore a counterpart to direct expenditures, as both were seen as forms of government spending, noting that according to the Global Tax Expenditure Database (GTED) Companion Paper, tax expenditures were costly and ineffective in reaching their stated goals.

He said though tax expenditures were normally self-driven, some expenditures had been occasioned due to some form of conditionality in overseas development assistance, adding that in line with the resolve to reduce tax expenditures, United Nations Resolution 69/313 of July 27, 2015 included a clause where donor countries agreed not to make requests for tax exemptions on goods and services delivered as government-to-government aid.

He urged all stakeholders to work towards the full realisation of the resolution while dealing head-on with self-driven tax expenditures, indicating that to achieve the clause, the UN Committee on Tax issued guidelines for implementation of the resolution while the OECD had set up a mechanism for monitoring progress in that area.

On Ghana’s experience with tax expenditures, he said it constituted a significant part of public finances in Ghana notwithstanding the government’s effort to contain its rise, noting that over the last decade, tax expenditures resulting from incentives had reduced government revenue by between one and four percent of the country’s gross domestic product (GDP).

Dr. Angela Lusigi, the United Nations Development Programme (UNDP) Resident Representative, said for her outfit, the workshop was of importance in their shared mission to assist developing countries not only in generating sufficient resources to finance their development but also in ensuring that fiscal policies and tax administration were equitable, efficient, and sensitive to the various dimensions of the population, such as gender, youth, and the vulnerable.

Dr. Lusigi said Africa experiences a significant loss, amounting to as much as 17.8 percent of its overall tax revenue due to tax expenditures, saying there was a need for a comprehensive evaluation of tax expenditures and their resulting effects as well as whether they effectively fulfil their intended objectives.

Mr. Markus Paffhausen, the Advisor, Secretariat of the Addis Tax Initiative, said the regional tax expenditure workshop series was initiated as part of the commitment to increase tax expenditure transparency by publishing reports on them to facilitate cost-benefit assessments and ultimately reduce wasteful tax expenditures and improve taxpayers’ trust.

This, he said, came out of the ATI Declaration 2025, which had four commitments that guide the work of its members to achieve, with commitment three stating that members commit to applying coherent and coordinated policies that foster combat tax-related illicit financial flows.

He said the main objectives of the first technical follow-up meeting were to enable a more technical deep dive into the different stages of the policy cycle of tax expenditures, ranging from establishing a benchmark over data requirements for the estimation and evaluation of tax expenditure provisions to reform processes and consolidating the regional network initiated last year.

Mr. Nyatefe Wolali Dotsevi, the Tax Research Manager, West Africa Tax Administration Forum (WATAF-FAFOA), said its member states have been estimating that, for quite many years, revenue forgone from tax expenditures amounted to billions of dollars of their GDPs, saying that these figures remained contentious and existing data constraints limit the ability of some of them to evaluate the budgetary cost of all tax expenditures.

Mr. Dotsevi said in the quest for improvements in revenue generation, transparency, accountability, and efficient management of public finance, WATAF member states aimed to improve their reporting of tax expenditures, which is the first step towards understanding their cost-effectiveness and providing evidence to better inform fiscal policymaking and trigger tax reform where necessary.

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