In a bid to expand its tax net, the Ghanaian tax administration recently introduced an annual carbon levy on vehicles and industrial emissions.
This development made Ghana the third African country after South Africa and Mauritius to introduce such a tax. Beyond the tax net expansion, the tax also doubles as a health precautionary measure by tackling harms associated with vehicular emissions.
The government further buttressed that going the tax route seems the cheapest tool to explore, ensuring that polluters pay for the harm that causes and also double as an effective means of preventing it.
Ghana Vehicle & Industrial Emission Tax: Data
A report by the lancet study has it that in 2020, about 28,000 Ghanaians were believed to have died prematurely from air pollution while 0.95% of the gross domestic product was lost in 2021 due to air-pollution-related deaths.
Ghana’s government believes the vehicle emissions tax is a more cost-effective and equitable way to make sure the polluter pays, prevent harm and protect the public. Some 28,000 Ghanaians died prematurely from air pollution in 2020. Air pollution-related deaths cost Ghana 0.95% of its gross domestic product, according to a 2021 Lancet study.
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Here are the key highlights from the recent tax move you need to know and their significance
- The tax is part of Ghana’s broader environmental fiscal reform measures introduced by the government in 2010. The goal is to shift the burden of taxation to environmentally damaging activities like pollution.
- Ghana’s government aims to tackle air pollution, with the transport sector being a significant contributor. Lower respiratory infections, linked to air pollution, are among the leading causes of death in the country.
- Going back memory lane in 2021, a sanitation and pollution levy was introduced on petrol and diesel to improve air quality. Additionally, a luxury vehicle tax was implemented in 2018 but was suspended due to public outcry.
- Ghana’s proposed emissions tax is based on internal combustion engine capacities. It ranges from ghs75 (us$6) for motorcycles to ghs300 (us$24) for certain vehicles. Ideally, the tax should be based on actual vehicle emissions for better effectiveness.
- Critics argue that the tax amounts to double taxation and that there’s no clear plan for how the tax revenue will be utilized. Some sectors, like manufacturing and transportation, see the tax as adding to the cost of doing business, which could be passed on to consumers.
- Ghana joins other African countries like Zambia, South Africa, and Namibia in implementing environmental taxes. The proposed emissions tax in Ghana is compared to south Africa’s carbon emissions tax, highlighting similarities and differences.
- Ghana aims to improve tax collection to 18% of GDP by 2028. This includes extending the electronic VAT system and introducing taxes on industrial and vehicle emissions as part of revenue generation efforts.
Recommendation
Ghana must harmonize existing environmental taxes, scrap overlapping levies, and allocate tax proceeds to address environmental issues effectively. The article also suggests tying the tax to actual emissions and revising tax thresholds for better equity and efficiency.