Vice President Mahamudu Bawumia recently pledged for a tax amnesty if he becomes president. This is a significant campaign promise in the realm of fiscal policy. Mahamudu Bawumia has been the Vice President of President Nana Akufo-Addo, who is at the end of his second presidential term.
Ghana’s Vice President Mahamudu Bawumia has announced plans for a “tax amnesty” should he win the election scheduled for December, in a move that supporters say will boost economic growth but critics fear is unaffordable.
Bawumia announced the plans as part of a wider package intended to simplify the country’s tax regime, committing to bringing forward what he called a “citizen and business-friendly flat tax regime.” He added that “to start the new tax system on a clean slate, my government will provide a tax amnesty […] so that everyone will start afresh.”
A tax amnesty is a temporary relaxation of tax laws, usually granting a specific group of taxpayers the opportunity to pay outstanding taxes, penalties, and interest without facing additional legal consequences such as prosecution or further penalties. These programs are typically used by governments as a means to encourage voluntary compliance with tax laws, increase tax revenue, and reduce tax evasion.
Tax amnesties can generally take various forms. It can be a general amnesty, a partial amnesty, or a specific amnesty. As a general amnesty, a tax amnesty is offered to all taxpayers who meet certain criteria, such as a specific time period during which taxes can be paid without penalties or legal action. As a partial amnesty, a tax amnesty allows taxpayers to settle their tax liabilities by paying a portion of the total amount owed, with the remainder forgiven. As a specific amnesty, a tax amnesty is targeted at particular types of taxes, taxpayers, or situations. For example, a government might offer an amnesty specifically for individuals or businesses with undisclosed offshore assets.
Tax evasion has been a serious fiscal concern in Ghana. Indeed, a significant portion of economic activity in Ghana occurs in the informal sector, where businesses and individuals may not fully report their income or pay taxes. And the complexity of Ghana's tax laws and regulations created opportunities for evasion, as taxpayers exploited loopholes or engaged in fraudulent activities to minimize their tax liabilities. To address tax evasion, the Ghanaian government has implemented various measures, including strengthening the tax administration, simplifying the tax system, and increasing awareness and education of tax laws. There is still a lot of work to be done.
Tax amnesties are often used by governments to encourage tax compliance, stimulate economic activity, and repatriate funds held abroad. By offering a tax amnesty, Bawumia is likely aiming to address tax evasion issues, attract capital back into the country, and potentially boost revenue in the long term. However, the success of such a policy would depend on its design, implementation, and enforcement to ensure that it achieves its intended objectives without unintended consequences.