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The project is also to support unions to build capacity in the areas of tax justice and to propose alternatives to public sector restructuring.
Tax plays a vital role in society in every country, redistributing wealth from corporations and rich individuals, funding essential public services and tackling poverty. Instead multinational companies dodge millions (if not billions) of tax every year, acting as giant corporate parasites on the countries they operate in, sucking profits out and leaving the rest of society paying the price. Also, most citizens fall outside the tax net thereby leaving the few formal sector workers to shoulder the entire tax burden to raise revenue for development.
There is no one definite figure for how much developing countries lose to tax avoidance and evasion, as the real figures are hidden behind the secrecy of multinational companies' internal trading and the world's tax havens. However, there are some well researched estimates we can use for the scale of money lost. The High Level Panel (HLP) on illicit financial flows indicates that the continent loses about $50 billion annually through Illicit Financial Flows (IFF).
Ghana is also losing huge revenues from taxes through tax exemptions, fraud/corruption & price transfers, tax evasion, tax avoidance and other illicit transfers by companies.
Corporate tax abuses could also be found in other sectors (power, petroleum and mining) through stability clauses and model agreements. An Action-Aid report on investment in Ghana found that the country is losing about $1.2billion annually due to tax incentives. In addition, 41% of trade tax and 28% of direct tax and VAT revenues were lost through exemptions in 2012. The impact includes revenue shortfalls resulting in deficits; impedes ability to execute fiscal policy; excessive borrowing (domestic & foreign) by government; foreign aid (in whatever form with conditionality's); and earmarked revenues are not released on time. Because the state is denied these revenues, public assets are sold to make up for the deficit. This creates a vicious cycle. We are also faced with a difficult economic situation and the IMF has recommended major public sector restructuring under the Extended Credit Facility (ECF).
The government plays a central role in the tax system that allows this appalling injustice to happen, and it is only through public pressure and dialogue that the Ghana government will stop fuelling tax dodging by multinational companies and also expand the tax net to cover the many that do not pay tax at all or do not pay the appropriate tax.