If poverty is really to
be reduced, then the government must redistribute income and wealth by taxing
the rich and providing basic services at no cost for all. We should campaign
against charging for public services and cost sharing as this excludes the
poor. Creating a ‘business
friendly’ environment to attract foreign direct investment does not lead to a
trickle down of wealth from the rich to the poor. In contract, all the evidence suggests that it results in
increased inequality with wealth gushing up to the corrupt elite, whilst the
majority suffer endemic poverty.
Economic elites are
often well-positioned to influence policy and block tax increases.
Investment power and
political power correspond to two distinct modes through which economic elites
can exert influence. However, the Arab Spring, the Occupy Movement, protests
and strikes in Brazil, China, Turkey and across sub-Saharan Africa show that
another world is possible. We need to campaign with the strength of the organised
working class to ensure that the government provides sufficient resources to public
services. We need to ensure that the basic human rights of health, education,
water and sanitation are available to all. The resources are available for this program if the
government is prepared to make the tax system more progressive. Wealthy
companies and individuals should all have to pay their fair share of taxes.
Basic needs as human rights
The following
should be basic human rights, but we need to campaign for their achievement:
·
Free education for all children
·
Free health for all
·
Free access to safe water and sanitation
·
Decent minimum wage.
Education
It is widely
recognised that basic education should be a human right, for example:
·
Article
26 of the Universal Declaration of Human
Rights[i]
asserts that: “Everyone has the right to education. Education shall be free, at
least in the elementary and fundamental stages. Elementary education shall be
compulsory.”
·
Millennium
Development Goal[ii] 2.A is to
ensure that, by 2015, children everywhere, boys and girls alike, will be able
to complete a full course of primary schooling.
·
This
is supported by the Ghanaian constitution[iii].
However, primary
completion rate for sub-Saharan Africa is only 70%[iv].
In 2011, UNESCO said that almost 30 million African children were not in
school. This includes nearly 650,000 children in Ghana[v].
Free education
should include books, feeding (breakfast and lunch)[vi]
and uniforms for at least 10 years for each learner. School fees, cost sharing
and all contributions to school funds etc should be abolished. Student grants should
be provided for post-secondary education.
In Ghana school
fees have been abolished for the first 11 years of schooling. However, the
costs of basic school requirements such as school uniforms and exercise books
are still too high for poor households and often deter parents from sending
children to school[vii].
To fund these
educational services, 56 developing country governments, members of Global Partnership for Education, agreed
to spend at least of 20 per cent of their total annual budgets on education
(with half earmarked for pre-primary and primary education)[viii].
This is supported by UNESCO[ix].
Ghana spends
slightly more than 15% of public expenditure on education and so would need to
increase spending on education by a third to meet international standards.
Health Care
It is also widely
recognised that health care should be a human right, for example:
·
Article
25 of the Universal Declaration of Human
Rights1 asserts that:
“Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family”.
“Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family”.
·
Millennium
Development Goals2 directly relevant to health include:
· Goal 4: Reduce child mortality
· Goal 5: Improve maternal health
· Goal 6: Combat HIV/AIDS, TB, malaria and other
diseases.
Thus free health care
including medicines for all should be a basic human right.
Charging for primary
health care (‘cash & carry’) was as disaster. Health insurance schemes
similarly mean that many of the poor are not covered. In Ghana it is estimated
that less than one in five are covered by the National Health Insurance Scheme
(NHIS)[x].
Moving away from health insurance could save US$83 million each year in Ghana.
Enough to pay for 23,000 more nurses. There should be free anti-retroviral
medicines for all those who are HIV positive, but this is not included in the
Ghana NHIS.
In 2001 African
governments pledged to spend at least 15% of their budgets on health in the
Abuja Declaration[xi]. In 2012, WHO
estimated the minimum spending per person per year needed to provide basic,
life-saving services was US$44[xii] and that
low-income countries would need to spend a little over US$60 (GHȻ120) per person per year by 2015 to achieve the
Millennium Development Goals.
Ghana only currently
spends about 12% of its government budget on health or US$27 (GHȻ54) per capita9. So significant increases are needed in
the health budget and a more efficient approach than the NHIS to fund these
services.
Water and Sanitation
Public
water and sanitation services are essential for sound public health. The
Millennium Development Goals call for halving the proportion of the population
without sustainable access to safe drinking water and basic sanitation between
1990 and 2015.
The following targets
are now being agreed internationally for water and sanitation:
· use of an improved drinking-water source within 30
minute water collection round trip
· use of an improved sanitation facility at home, shared
between five households or less.
· all schools and health centres should have water,
sanitation and hygiene[xiii].
Across Africa 63% of
population use improved drinking-water and 48% use improved sanitation
facilities (2011). In Ghana the
figures are 86% and 72%11.
In 2008, at an African
Union meeting, African ministers set a target to spend 0.5 per cent of GDP on
sanitation and hygiene. Various other studies, notably by UNDP, have suggested
that the cost of meeting the Millennium Development Goal for water is around 1
per cent of GDP annually. So the
target for water, sanitation and hygiene (known as WASH) should be 1.5% GDP[xiv]. Ghana only spends
around 0.5% of GDP on this sector.
In 2010, at the first
high level meeting on sanitation and water for all held in Washington DC, the
Government of Ghana promised to spend $350 million (GHȻ700 million) a year on the Water, Sanitation and
Hygiene (WASH) sector. However in 2010, only GHC108 million was allocated and
GHC132 million for 2011[xv].
A Progressive Tax System
To ensure that adequate
public services can be afforded and to help to make society more equitable
progressive taxation should be increased by:
·
Raising company
and personal income tax rates to at least 30%[xvi]
for monthly incomes above GHȻ3,000 (around
ten times average per capita GDP)
·
Increase property
tax for land/buildings of more than 100ha or value of more than GHȻ100 000[xvii].
·
Import duty on
TVs, cars and other electrical goods to be increased
·
Review costs and
benefits of tax holidays and free zones and introduce greater controls to
reduce capital flight.
“The experience of the first
three post-war decades in developed countries, when marginal and corporate tax
rates were higher but investment was also higher, suggests that the willingness
of entrepreneurs to invest in new productive capacity does not depend primarily
on net profits at a given point in time; rather, it depends on their
expectations of future demand for the goods and services they can produce with
that additional capacity...
However, competing with
other potential host countries by offering lower taxes is problematic since it
triggers a downward spiral in taxation that reduces fiscal space in all the
countries concerned, while initial locational advantages based on taxation tend
to erode over time”[xviii].
Across sub-Saharan Africa reduced
import tariffs are only partially (30%) being replaced by domestic taxation,
mainly VAT. VAT is very
inefficient to collect and is less progressive. In addition, rates of corporation tax have generally reduced
due to tax competition between countries
Property tax Taxation of
property and rental income could raise revenues worth an estimated 1-2% GDP in
Ghana[xix]. Property taxes should be extended
starting with larger urban properties and large foreign owned farms. Revenue
lost since lowering royalty tax on mining in Ghana is estimated at US$68
million per year or GHc 102 million17. The previous tax rates should be re-introduced.
Capital flight involves the
deliberate and illegal disguised expatriation of money by companies or
individuals taxable within the country of origin. Developing countries lose
more money through private capital flight than they receive in donor aid[xx]. Capital flight over 1970 to 2008 is
estimated to have been 66% of the GDP of Ghana or over two and a half times the
external debt[xxi]. Capital controls should be re-introduced
to reduce the level of capital flight from Ghana.
There should be a systematic
study of the overall costs and benefits of the existing incentives regime in
Ghana, including tax holidays and tax free zones. Reversing the free zone
status of existing forestry firms would raise 0.5% GDP in additional revenue17.
Regional bodies (African
Union, NEPAD, ECOWAS, UMEOA etc) should take up fiscal issues and tackle some
of the problems of transfer prices (which enable international companies to
evade tax), information exchange especially with tax havens (to reduce tax
evasion by the rich and expatriate individuals and companies), reducing the
facilitation of capital flight and off-shore intellectual rights. Good practice in terms of efficient and
effective taxation policies and practices should also be shared and developed
regionally. Regional bodies should
also push for governments to collectively retain and, where appropriate,
increase import tariffs and corporation tax rates.
Consideration of using some
of Ghana’s oil revenue to introduce a monthly Basic Income Grant of GHȻ20 for all people (cost 4.4% of GDP). This will reduce poverty, improve
access to health and education and reduce crime. Petroleum receipts would give
a monthly income of around GHȻ6. Could
be introduced first in Upper East and Upper West where poverty levels are particularly
high.
Per capita GDP per day
(assuming working 200 days a year) was GHȻ16 (US$8)
in 2012 (nearly GHȻ500 a month). The Daily Minimum
Wage is now GHȻ5.24 (from May 1, 2013) (GHȻ141 a month).
People on this wage are still be expected to pay income tax (so tax
thresholds should be increased. The minimum pension under SSNIT is GHȻ100 (from 1.1.13). Real increases are still needed to bring the minimum wage
and pension levels up to a reasonable level.
References:
For
a more detailed report with targets and analysis of other sectors of public spending
see:
Tax
Justice Network Africa (2011) Addressing
Inequality in Africa through Taxation
www.taxjusticeafrica.net/content/adressing-inequality-africa
www.taxjusticeafrica.net/content/adressing-inequality-africa
This
manifesto should be updated when the results of the Sixth Ghana Living Standard Survey are published (September 2014).
[i] UN (10 December 1948) Universal Declaration of Human
Rights
[iv] AfDB (2013) Millennium Development Goals Report: http://www.afdb.org/en/knowledge/publications/millennium-development-goals-mdgs-report/
[vi] “WFP’s Ghana country programme evaluation, as well
as studies on the Ghana School Feeding Programme (GSFP), suggests that school
feeding is one of the most effective ways to increase enrolment in schools
across the three northern regions and in areas of endemic food insecurity (WFP,
2010a; SNV, 2009; SEND, 2008).” (UNESCO 2012: 74)
[vii] GNECC, 2008; CREATE 2007; Avotri et al. 1999; Boakye
et al. 1997). (UNESCO 2012: 70)
[viii] Forty-four developing country governments signed up
to a target for education spending of 20 per cent of total spending (with half
earmarked for pre-primary and primary education) in 2010 as part of their commitment
to implement the Education for All Fast-Track Initiative (EFA-FTI). Fifty-six
developing countries are now members of the Global Partnership for Education,
the successor to EFA-FTI.
[ix] UNESCO (2013) Education
for All Global Monitoring Report:
For more
information on education spending see:
UNESCO: Institute
for Statistics Data Centre. Montreal, Canada.
[x] Oxfam,
ISODEC etc (2011) Achieving a Shared Goal: Free Universal Health Care in Ghana http://www.oxfam.org/sites/www.oxfam.org/files/rr-achieving-shared-goal-healthcare-ghana-090311-en.pdf
[xii] WHO (2012) Spending on health: A global overview
http://www.who.int/mediacentre/factsheets/fs319/en/
Basic WHO statistics on spending in each country:
http://apps.who.int/nha/database/StandardReport.aspx?ID=REPORT_COUNTRY_PROFILE
http://www.who.int/mediacentre/factsheets/fs319/en/
Basic WHO statistics on spending in each country:
http://apps.who.int/nha/database/StandardReport.aspx?ID=REPORT_COUNTRY_PROFILE
[xiii] WHO and UNICEF (2013): Progress on Drinking Water
and Sanitation, 2013 Update. http://www.who.int/water_sanitation_health/publications/2013/jmp_report/en/index.html
[xiv] Government Spending Watch:
www.governmentspendingwatch.org/research-analysis/water-and-sanitation
[xv] The Daily Guide on Wednesday 30, January 2013,
[xvi] In 2006, corporate tax in Ghana was reduced from 28%
to 25% (was 30% the year before).
[xvii] Property tax Taxation of property and rental income
could raise revenues worth an estimated 1-2% GDP17. Property tax is levied annually by local authorities
on the estimated value of the property, depending on the classification of the
area where it is located, with the rates range from 0.5 to 3 percent.
[xviii] UNCTAD (2012: XIV) Trade and Development Report 2012 – policies for inclusive and balanced
growth, New York and Geneva: United Nations
http://unctad.org/en/pages/PublicationWebflyer.aspx?publicationid=210
[xix] Prichard, W. and Bentum, I. (2009) Taxation and
development in Ghana: finance, equity and accountability, Tax Justice Network
and ISODEC http://www.taxjustice.net/cms/upload/pdf/Ghana_0906_Report_printer_friendly.pd
[xx] SOMO (2008) Taxation and Financing for Development
[xxi] Ndikumana & Boyce (2011) Africa’s Odious Debts –
how foreign loans and capital flight bled a continent
http://zedbooks.co.uk/paperback/africas-odious-debts
.jpg&container=blogger&gadget=a&rewriteMime=image/*)
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