Thompson: Govt focused on equitable and progressive tax reform

The Fiscal Strategy Report (FSR) points to the government’s serious consideration of the development of a more equitable tax system, with Minister of State for Senator Finance Kwasi Thompson stating yesterday that the government is committed to pursuing progressive changes in the collection of taxes.

Thompson, who presented the FSR in the Senate yesterday, explained that the FSR’s medium-term, forecasted revenue projection is based on the pursuit of “equitable and progressive tax reform”, along with the strengthening of tax compliance, improvements in tax administration and the updating of the tax incentives regime given to investment projects.

The FSR explains that in the medium-term, government hopes to grow the ratio of tax to gross domestic product (GDP) from 14.5 percent in fiscal year 2020/2021 to a high of 20.5 percent by 2024/2025, “which is necessary to support the overall fiscal and debt consolidation objectives under the recently revised medium-term fiscal framework and the government’s corresponding economic and social priorities”.

“Given the likelihood that this outcome will not be achieved by economic growth alone, the government intends to pursue a combination of improved tax administration to increase the revenue yield and continued tax policy reforms, in addition to the expected unwinding of the existing incentive schemes necessitated by the two recent external shocks (COVID-19 and Hurricane Dorian).

The FSR added that government will carry out a review of the country’s tax regime, designed to identify and eliminate gaps and contain revenue leakages.

There will also be a review of the existing tax regime to in order to develop a “road map of tax system reform recommendations that would introduce greater progressivity, fairness and stability”, the FSR explained.

The FSR also explained that government intends to increase revenue yield from existing sources by strengthening its investigation and intelligence capabilities to reinforce the Revenue Enhancement Unit; continuing the use of big data to detect tax evasion; increasing the use of risk-based audits for value-added-tax (VAT); increasing the use of third-party entities to improve revenue collection; continuing to strengthen the customs department’s Electronic Single Window to improve customs revenue intake; and by consolidating and completing the real property tax modernization project.

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