Graphic Business News

Govt urged to review luxury vehicle tax

By: Maclean Kwofi
Dr Alex Ampaabeng,Fiscal Policy Specialist, Oxfam Ghana
Dr Alex Ampaabeng,Fiscal Policy Specialist, Oxfam Ghana

A Fiscal Policy Specialist at Oxfam Ghana, Dr Alex Ampaabeng, has asked the government to undertake a comprehensive review of the luxury vehicle levy to make it more convenient to encourage compliance.

The review, he stated, must incorporate a change of name from the current luxury vehicle levy to Carbon Emission Tax (CET) to help the government achieve its revenue target in the years ahead.

Last year, revenue generated from the levy was GHȼ21.3 million, however the figure was a shortfall of 79.52 per cent against the projected GHȼ104 million in the 2018 mid-year budget.

In a telephone interview with the GRAPHIC BUSINESS on April 11 in Accra, Dr Ampaabeng observed that the revenue generated from the levy would continue to dwindle until a thorough review was undertaken.

"I will suggest that the government undertakes a thorough review of the luxury vehicle levy, have a broader stakeholder consultation, institute proper exemption clauses within it to ensure horizontal equity," he said.

The government has come under criticisms lately from car owners and dealers for its excessive tax policies.

Five different associations recently staged demonstrations in protest against the levy which was introduced by the government in August 2018 specifically for vehicles with engine capacity of 2.9 litres and above.

The associations are the Vehicle and Asset Dealers Association of Ghana (VADAG), National Concerned Spare Parts Dealers Association, True Drivers Union, Concerned Drivers Association, Ghana Committed Drivers Association and Chamber of Petroleum Consumers.

According to them, the imposition of the levy was counterproductive to their businesses.

Since the levy was introduced, they said over 5,000 supposed luxury vehicles have been parked in various garages across the country as prospective buyers had refused to buy them because they were trying to avoid the tax.

Corroborating the views of the dealers, Dr Ampaabeng indicated that the tax was not purely about how luxurious a vehicle was, otherwise it would have been levied on some of the new and super modern cars with the luxurious specs, and not on an old pick-up which had no air conditioner, a simple power-steering or central locking system.

"The name of a tax must always reflect its intended purposes but in this levy, it’s the opposite. The levy is purely based on cars Co2 emission, hence larger engine capacity cars attract more taxes, so why choose the name ‘luxury’?” he asked.

Beyond name change, Dr Ampaabeng also called for the review of all the exemptions within the levy to ensure equity.

According to him, the levy should also consider the market value of the car, so the newer or more expensive the car, the higher the levy.

"It is unfair to put the owner of a brand-new land cruiser of 3.5L in the same tax category as someone with a 1999 pick-up with same engine capacity.

World of taxation
The fiscal policy specialist explained that the levy was not new in the world of taxation, but Ghana’s own was a bit rushed with no stakeholder consultations.

He stated that it fell under the broader sin taxes and it intended to discourage the use of larger carbon-emission vehicles to safeguard the environment.

"That should be the message and not to package it as luxury. Clearly most of the cars over the 2950CC mark are not necessarily luxurious compared to some of the modern and often lower-engine capacity cars.

“The word luxury is what is causing all the confusion. With a name change, a broader engagement of key stakeholders, review of the exemptions, flexible payment terms, including instalment agreements and active public education, it will surely improve compliance and subsequently revenue in the long run,” he said.

He added that the government must invest in educating taxpayers about this levy, and such investment must be undertaken for its long-term benefits and not one that should be reaped in a few months.