Finance Minister raises concerns over tax exemptions and extractive sector under-capitalization

Finance minister Dr. Cassiel Ato Forson has expressed serious concerns about the negative impact of tax exemptions on Ghana’s revenue mobilisation and the under-capitalisation of the extractive sector.

He highlighted the significant fiscal challenges facing the nation, stressing that tax exemptions on Value Added Tax (VAT), Personal Income Tax (PIT), and import duties are estimated to result in a “staggering” 3.9 percent loss of GDP.

The Minister made the statement during a presentation on the true state of Ghana’s economy at the two-day National Economic Dialogue in Accra on Monday.  

He emphasised that those figures did not include corporate income tax exemptions, which further exacerbated the revenue shortfall.

“While these exemptions often offer temporary relief, they are incredibly costly and introduce significant complexity and distortions within our tax system,” he said.

Dr. Forson specifically pointed to the VAT exemption on the supply of dwellings and land, which accounts for 33 percent of the total VAT exemptions.

He criticised the previous administration for abandoning VAT on real estate in 2024, attributing the decision to electoral considerations, and emphasised the urgent need to address this issue.

The minister also highlighted Ghana’s failure to adequately capitalise on its extractive sector, noting the significant gap between the sector’s natural resource rent, which is 14 percent of GDP, and the actual fiscal revenue generated, which is only 1.5 percent of GDP.

“We are struggling to leverage our natural wealth, capture its rent, and channel it towards productive infrastructure and human capital development,” he said.

“We must ask ourselves; can we not harness even a fraction of this 14 per cent to support our nation’s progress?”

Dr. Forson attributed the country’s poor revenue mobilisation to various factors, including a stagnant domestic revenue collection rate, numerous tax exemptions, a complex tax system, and challenges in tax administration.

He noted that Ghana’s VAT collection performance was significantly behind that of its peers, emphasising the urgent need for reforms to streamline the VAT regime.

Source: GNA