The Prime Minister had conveniently not given the full context in which the Tax Review Recommendations to increase GST would be applied.
The recommendation by the Tax Review Committee to increase GST was to have been accompanied by two other complementary changes that needed to take place. These are:
a) Reduction in personal tax rates.
b) Increase in minimum threshold for being taxable from K10,000 to K15, 000 and eventually to K20,000
These two proposed changes are to alleviate the concerns raised by the Prime Minister where he went on to say:
“We are committed to reducing personal tax rates and company tax rates. But we are at the same time, to make up for that revenue downfall, going to expand the base of the tax rate.”
The “revenue downfall” that the Prime Minister was referring to will be captured by the increase in GST.
There is a misconception with the view that the majority of people who are not salary and wage earners are struggling. This is not true. Many of this people participate in the informal cash economy. There is a lot of money floating in that sector. If GST is increased, it allows for more of that money to flow back into the formal economy at the points of sale of goods and services.
Give the salary and wage earners some tax break by implementing the recommendations of the Tax Review Committee by doing the following:
a) reduce the personal income tax rates
b) increase the minimum threshold to K20,000
c) increase GST to 15%
I understand that the Prime Minister would like to paint a picture of how the PNC had resisted introducing such tax increase in order to help the majority of our population. What the Prime Minister is saying regarding the proposed increase in GST is just half-truths.
In fact, the PNC could have implemented many of the Tax Review Committee’s recommendations which would have done away with unnecessary fiscal incentives for major corporations.