Article: Dr Bawumia’s new tax system

Dr Bawumia’s new tax system

Tax is a compulsory contribution to a country’s revenue, levied by the government on workers’ income and business profits, or added to the cost of some goods, services, and transactions.

The main purpose of taxes is to fund government spending and public expenditures and to regulate and reduce negative externalities.

Ghana currently uses the progressive tax system it has inherited since independence. This type of tax system involves a tax rate that increases or progresses as taxable income increases.

Most people do not understand it, and it is extremely cumbersome, subject to a lot of abuse, and not entirely beneficial for the country.

That is one of the main reasons Dr. Bawumia wants to change our tax system and implement the Estonian tax model.

According to the Tax Competitive Indexes for 2023, the Estonian tax system is transparent, straightforward, and currently the best in the world.

It has maintained this position for the past ten years with an overall score of 100.0, followed by Latvia in second place with a score of 88.5.

The driving force behind this positive achievement is that there is no corporate income tax on reinvested and retained profits, which means that Estonia’s corporate income tax system allows businesses to reinvest their revenues tax-free and expand their operations considerably faster without incurring additional costs.

Individual income is taxed at a flat rate of 20%, which will increase to 22% on January 1, 2025. There are also no taxes on distributed dividends that have already been taxed with a corporate income tax.

Taxes on property are based solely on the value of land, not real property or capital. It has a territorial tax structure that exempts 100% of foreign earnings made by domestic corporations from domestic taxation, with rare exceptions.

Dr Bawumia will also introduce a tax amnesty for some time to wipe out tax obligations for individuals and cooperative bodies, giving them a fresh start in business. This will help Ghana move to a flat-rate tax system, which is based on a single tax rate on incomes, products, and services.

Due to exchange rate fluctuations and higher duties, importers have been struggling at the ports to clear their containers.

Dr Bawumia will address this issue by introducing a flat rate tax in cedis on import duties and ensuring that the duties in our ports will either be equivalent or lower as compared to our neighbouring country, Togo.

This will ease importers’ struggles, encourage them to use our ports, as well as stop the usage of unapproved routes with goods.

Dr Bawumia’s proposal to adopt Estonia’s tax model, which will simplify our tax system and boost economic growth, as well as the implementation of tax amnesty to give businesses a fresh start and a flat-rate cedi tax across our ports, will transform Ghana and propel us to the next chapter of possibilities.