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Policy Processes that Preceded Implementation of over-aged Vehicle Tax in Ghana

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Alex Kombat, Ghana Revenue Authority (GRA)

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Policy Processes that Preceded Implementation of over-aged Vehicle Tax in Ghana

  1. 1. By Alex Moyem Kombat (2217670) INCLUSION OF AVIATION IN THE EU ETS: 19th October, 2017 POLICY PROCESSES THAT PRECEDED IMPLEMENTATION OF OVER-AGED VEHICLE TAX IN GHANA By Alex Moyem Kombat
  2. 2. TABLE OF CONTENTS 1. Background and motivation 2. Objectives 3. Methodology 4. Key results 4.1 Policy processes of the tax 4.2 Assessment of the tax 5. Discussion and conclusions 6. References 219th October, 2017 Policy process of over-aged vehicle tax in Ghana
  3. 3. BACKGROUND AND MOTIVATION • Environmental taxes are increasingly being used all over the world for pollution control, resource management and for revenue purposes. • OECD and EEA database in 2015 detailed over 700 environmental taxes in the 34-OECD countries and 110 in 20 non-OECD countries. • EU-28 earned €359.3 billion from environmental taxes in 2015 corresponding to 2.4 % of their GDP and 6.3 % of the total taxes. (Eurostat, 2017; OECD and EEA, 2015; OECD, 2013). 319th October, 2017 Policy process of over-aged vehicle tax in Ghana
  4. 4. BACKGROUND AND MOTIVATION • Environmental taxes are limited in Africa because countries pay attention to standards which are deemed to be in line with legal norms. • Ghana is among a few countries in Africa that have implemented environmental taxes for revenue purposes and pollution control. • Ghana’s environmental taxes include: (1) plastics excise tax, (2) over- aged vehicle tax, and (3) petroleum excise tax. (Kombat, 2015; BMZ,2013; GRA, 2011) 419th October, 2017 Policy process of over-aged vehicle tax in Ghana
  5. 5. BACKGROUND AND MOTIVATION The paper looks at the over-aged vehicle tax which was introduced in 2002 to: 5 2. Reduce importaion old vehicles 3. Reduce risks 19th October, 2017 Policy process of over-aged vehicle tax in Ghana 1. Generate revenue 4. Reduce air pollution
  6. 6. BACKGROUND AND MOTIVATION Table 1: Design and mechanisms of the tax 619th October, 2017 Policy process of over-aged vehicle tax in Ghana Market solution Rationale is to reduce demand of the old vehicles by incorporating the tax into pricing of the vehicles Scope Tax covers used-vehicles under chapter 87 of the Ghana Harmonized System and Customs Tariff Schedule-2012 Edition Exemptions Ambulances, tractors, water tenders and amoured vehicles Rate 2.5% to 50% of CIF value of the vehicles depending on make, model, age and cylinder capacity in addition to import duties/fees Valuation Depreciated at 50% to obtain cost of vehicles, after which the freight and insurance values are added and tax at various rates Source: Ghana Customs Tariff Schedule (2012)
  7. 7. BACKGROUND AND MOTIVATION 7 The tax is under researched in Ghana owing to lack of research funding, and apparent limited scholars and interest in this field. Research gaps: 1. policy processes that preceded implementation of the tax have not been analyzed. 2. economic assessment of the tax has not been carried out 3. optimal potential of the over-aged vehicle tax has not been harnessed. 19th October, 2017 Policy process of over-aged vehicle tax in Ghana
  8. 8. BACKGROUND AND MOTIVATION • to reveal actor interests, motives, strategies and explore their impact regarding the policy decision-making processes that are essential for strengthening and improving the quality of the tax and related taxes. • to understand why and how the tax emerged. 2. Why assess the tax? • to determine the extend to which the tax has achieved its goal and objectives. 819th October, 2017 Policy process of over-aged vehicle tax in Ghana 1. Why analyze the policy processes of the tax?
  9. 9. OBJECTIVES 1. Analyse the policy processes that preceded implementation of the Over-aged vehicle tax in Ghana using the public choice approach. 2. Carry out the economic assessment of the tax using the criteria of goal attainment. 3. Harness the optimal potential of the over-aged vehicle tax in pollution control and prevention in Ghana. 919th October, 2017 Policy process of over-aged vehicle tax in Ghana
  10. 10. METHODOLOGY The paper has two parts: Part 1: Policy processes of implementation of the tax • Public choice approach: • Founded in the early 1960s, public choice applies the theories and methods of economics to the analysis of political processes • It identifies five groups of self-interested actors (Politicians, Voters, Industries, Bureaucrats and interest groups) who maximize their utility subject to certain contrains. Part 2: Economic assessment of the tax • Goal attainment criteria • Goal attainment is the capacity of a tax policy to meet its goal and objectives. • It involves turning goals into measurable objectives and determining how they have been realized in practice (Gawel et al.2014;Endres, 2011) 1019th October, 2017 Policy process of over-aged vehicle tax in Ghana
  11. 11. METHODOLOGY • Data gathering/sources: 1. Interviews 2. Legal instruments (Acts and Bills) 3. Institutional reports 4. Local newspaper articles 5. Parliamentary hansards 6. Existing statistics • Total stakeholder interviews: Sixty seven (67) with an average interview length of 1.32 hours. 1119th October, 2017 Policy process of over-aged vehicle tax in Ghana
  12. 12. METHODOLOGY Interview techniques and analytical procedure: • Purposive sampling method was adopted because of limited empirical studies on the subject. • Digital voice recording device was used. • Qualitative open-ended and close-ended questions were employed. • Data were analyzed qualitatively with the aid of transcription software f5 in addition to descriptive statistical analysis and stata 9 software. 1219th October, 2017 Policy process of over-aged vehicle tax in Ghana
  13. 13. 13 PART 1 POLICY PROCESSES OF IMPLEMENTATION OF THE OVER-AGED VEHICLE TAX 19th October, 2017 Policy process of over-aged vehicle tax in Ghana KEY RESULTS
  14. 14. PHASES: OVER-AGED VEHICLE TAX 14 Phase 1: Implementation of a ban on importation of over-aged vehicles Phase 7: Discussions on the possible review of the over-aged vehicle tax Phase 6: Implementation, monitoring and enforcement of the tax Phase 5: Enachment of the over-aged vehicle tax Act 634 Phase 2: Tax rates developed and discussed by stakeholders Phase 3: Approval of the over-aged vehicle tax rates Phase 4: Interim solution to decongest the ports due to the ban regulation • differences in the policy issues • changed in political actors 19th October, 2017 Policy process of over-aged vehicle tax in Ghana Criteria::
  15. 15. ACTORS, INTERESTS, MOTIVES AND STRATEGIES 15 Key actors POLITICIANS • NDC wanted the ban enforced • NPP wanted a tax implemented MINISTRIES & DEPARTMENTS • Had positive attitude towards a tax • Did not want business groups to have stronger voice INTEREST GROUPS • CPA preferred a tax to a ban • GPRTU opposed the tax VEHICLE BUSINESS GROUPS • Preferred a ban to a tax • Sought support from opposition parties and ECOWAS 19th October, 2017 Policy process of over-aged vehicle tax in Ghana
  16. 16. POLICY PROCESS AND OUTCOME • Prior to 1998: Over-aged vehicles were imported into Ghana without any restrictions. • 1994-1997: About 7,200 old vehicles got involved in road accidents, whilst 14,263.22 tonnes of CO2 and 72.49 µg/m3 of PM10 were emitted • 1998-2000: There was a ban on all over-aged vehicles imported into Ghana by Act 552 resulting in seizure of over 457,000 vehicle. • 2001: A Concession Act 598 was enacted to allow people to clear their confiscated vehicles. • 2002: Act 634 was passed to repeal Acts 552 and 598 and introduced a tax regime on all over-aged vehicles imported into Ghana. • 2003-2017: Implementation of the over-aged vehicle tax 1619th October, 2017 Policy process of over-aged vehicle tax in Ghana
  17. 17. 17 PART 2 ASSESSMENT OF THE TAX 19th October, 2017 Policy process of over-aged vehicle tax in Ghana
  18. 18. ASSESSMENT OF GOAL ATTAINMENT 18 Goal 1: Revenue was expected to decline significantly by 2015 • This has not been the case because of increased importation of the old vehicles • Tax revenue has risen steadly and it is expected to reach GHȻ119 million ($27 million) by 2020 using the trend line Policy process of over-aged vehicle tax in Ghana19th October, 2017 0.43 1.97 9.61 12.3 16.81 16.45 13.69 14.69 42.37 73.75 88.28 89.2 90.4 91.56 Y = 8.2836x - 22.019 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 TAXREVENUE(MILLIONGHC) YEAR Fig. 1:Over-aged vehicle tax revenue
  19. 19. ASSESSMENT OF GOAL ATTAINMENT 19 Y = 3370.2x - 12057 -20000 -10000 0 10000 20000 30000 40000 50000 60000 Over-agedvehicles(counts) Year Fig 2: Over-aged vehicle imports (1998-2015) Goal 2: Zero importation of over-aged vehicles by 2015 • Target not achieved • Old vehicles imports are expected to reach 62,083 by 2020 using the trend line Policy process of over-aged vehicle tax in Ghana19th October, 2017
  20. 20. ASSESSMENT OF GOAL ATTAINMENT 20 Goal 2: About 35% reduction in vehicular emissions by 2015 • Target not achieved • CO2 & PM emissions would be 4499.42 tonnes and 3.71 micrograms per cubic metre respectively by 2020 using the trend lines Y = 278.31x + 1623.4 Y = 0.1703x + 0.0284 0 0.5 1 1.5 2 2.5 3 3.5 4 0 1000 2000 3000 4000 5000 6000 7000 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 PM(tonnes) CO2(tonnes) Year CO2 (Tonnes) PM (tonnes) Linear (CO2 (Tonnes)) Linear (PM (tonnes)) Fig. 3: CO2 and PM emissions in Ghana (1998-2015) Policy process of over-aged vehicle tax in Ghana19th October, 2017
  21. 21. ASSESSMENT OF GOAL ATTAINMENT 21 Goal 3: Achieve single digit fatalities per 10,000 vehicles by 2015 • Target not achieved • Fatalities per 10,000 vehicles to reach 5.61 by 2020 using the trend line Fig. 4: Death rate per 10,000 vehicles (1998-2015) Policy process of over-aged vehicle tax in Ghana19th October, 2017 Y = -1.101x + 29.834 0 5 10 15 20 25 30 35 40 45 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Deathrate Year
  22. 22. DISCUSSION AND CONCLUSIONS • Identified a wide range of actors (mainly organizations) with different interests and motives during the political processes. • The over-aged vehicle tax was implemented to replace a more unpopular policy, the ban, and therefore was accepted by all actors. • Results reflected the principles of public choice theory, although certain issues could not be explained with the theory (e.g. risks, actor emotions). • The over-aged vehicle tax has not achieved any of its goals. However, more research is required to make sound statements since the data on pollution and fatality are not disintegrated into old and new cars. 2219th October, 2017 Policy process of over-aged vehicle tax in Ghana
  23. 23. REFERENCES • BMZ (Federal Ministry for Economic Cooperation and Development) (2013) Environmental Fiscal Reform: Case Studies, Bonn/Eschborn: Deutsche Gesellschaft für Internationale Zusammenarbeit GmbH (GIZ), pp.1-32 • Buchanan, J. M. (2012) Genesis, Public Choice, 152 (3), pp. 253-255. • Calcagno, P. T. (2010) Public Choice, 21st Century Economics: A Reference Handbook, Rhonda Free (Ed.), California/London: Sage Publications Ltd, pp.1-34 • Daily Graphic (2014) “Adaw River Still Polluted” March 4, pp.1-64 • Endres, A. (2011) Environmental Economics, Theory and Policy, Cambridge: Cambridge University Press, pp.1-375. • Eurostat (2017) Environmental Statistic, [Online], Available at: http://www. ec.europa.eu/eurostat/data/databaseAccessed August 31, 2017]. • Field, C. D. and Field, M. K. (2013) Environmental Economics and Introduction (6th Ed.), New York: McGraw-Hill /Irwin, p.1-480. • Gawel, E., Strunz, S. and Lehmann, P. (2014) “A Public Choice View on the Climate and Energy Policy Mix in the EU-How do the Emissions Trading Scheme and Support for Renewable Energies Interact?” Energy Policy, (64), pp.175-182. • Government of Ghana budget (2013) Budget Statement and Economic Policy of the Government of Ghana for the 2013 Financial Year, Accra: Ghana Publishing Company/Assembly Press Ltd, pp.1-332 • GRA (Ghana Revenue Authority) (2013) Tariff Interpretation Order,Ghana Revenue Authority Magazine, (5) pp. 2-31 • Hanley, N., Shogren, J. F. and White, B. (2013) Introduction to Environmental Economics, (2nd ed.), Oxford: Oxford University Press, pp.1-285. 23Policy process of over-aged vehicle tax in Ghana19th October, 2017
  24. 24. REFERENCES • Hansjürgens, B. (1995) "Zur unterschiedlichen durchcsetzbarkeit von unwelttssteuern und unweltsonderabgaben-Anmerkungen aus dem Blickwinkel der neuen politischen Ökonomie" published in Staatswissenschaft und Staatspraxis Jg 6 (3), pp.359-388 • Hansjürgens, B. (2000) Symbolische Unweltpolitik: Eine Erklärung aus der Sicht der Neuen Politischen Ökonomie, In: Hansjürgens, B., Lübbe-Wolf, G. (Eds.), Symbolische Unweltpolitik , Frankfurt am Main: Suhrkamp • Kirchgässner, G. and Schneider, F. (2003) On the Political Economy of Environmental Policy, Public Choice, 115 (3/4), pp. 369-396 • Kombat, A. M. (2017) Implementation of Environmental Taxation in Ghana, The Ghanaian Times, May 17:9 & 18:9 • Kombat, A. M. 2015. Implementation of Environmental Taxation in Ghana, Cottbus: Brandenburg Technology University 1-342 • Kombat, A. M. (2013) Economic Assessment of Environmental Taxes and Standards in Managing the Environmental Problems that Emanate from Oil and Gas Production on Ghana’s Jubilee Field, Journal of International Real Estate and Construction, 3 (1), pp.33-50 • MEST (Ministry of Environment Science and Technology) report (2010) A Report on Committee for Ban on Plastic in Ghana. Accra: MEST, pp.1-38. • MoFEP (Ministry of Finance and Economic Planning) Memorandum (2010) Customs and Excise (Duties and Other Taxes) (Amendment) Memorandum, Accra: Ghana Printing Company Ltd/Assembly Press, pp.1-4 • Mickwitz, P. (2003) A Framework for Evaluating Environmental Policy Instruments:Context and Key Concepts, Evaluation, 9 (4), pp.415-436 • Mueller, D. C. (2009): Public Choice III, Cambridge: Cambridge University Press, pp.1-747 • Obeng-Odoom, F. (2014) 'Urban Property Taxation, Revenue Generation and Redistribution in a Frontier Oil City', Cities, (36), pp. 58- 64. • OECD (Organization for Economic Co-operation and Development) (2013) Database on Instruments used for Environmental Policy and Natural Resources Management, Paris: OECD, pp.1-4 24Policy process of over-aged vehicle tax in Ghana19th October, 2017
  25. 25. 25Policy process of over-aged vehicle tax in Ghana 19th October, 2017
  26. 26. OVER-AGED VEHICLE TAX RATES 26 Vehicle type Tax rates A Motor cars i Where the age exceeds 10 years but does not exceed 12 years 5% of CIF value ii Where the age exceeds 12 years but does not exceed 15 years 20% of CIF value iii Where the age exceeds 15years 50% of CIF value B Commercial vehicles such as buses, vans and coaches i Where the age exceeds 10 years but does not exceed 12 years 2.5% of CIF value ii Where the age exceeds 12 years but does not exceed 15 years 10 % of CIF value iii Where the age exceeds 15 years but does not exceed 20 years 15% of CIF value iv Where the age exceeds 20 years 50% of CIF value C Commercial vehicles such as trucks, lorries and tipper trucks i Where the age exceeds 10 years but does not exceed 12 years 5% of CIF value ii Where the age exceeds 12 years but does not exceed 22 years 10 % of CIF value iii Where the age exceeds 22 years 30 % of CIF value 19th October, 2017 Policy process of over-aged vehicle tax in Ghana
  27. 27. OVER-AGED VEHICLE TAX REVENUE 27 0.43 1.97 9.61 12.3 16.81 16.45 13.69 14.69 42.37 73.75 88.28 89.2 90.4 91.56 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5 2 0 1 6 TAXREVENUE(GHC) YEAR 19th October, 2017 Policy process of over-aged vehicle tax in Ghana
  28. 28. OVER-AGED VEHICLE TAX REVENUE 28 19th October, 2017 Policy process of over-aged vehicle tax in Ghana Year Over-aged Vehicle imports 1998 1975 1999 2010 2000 2230 2001 2315 2002 2400 2003 2530 2004 3238 2005 7807 2006 16281 2007 23495 2008 23370 2009 15195 2010 15454 2011 36719 2012 50460 2013 48672 2014 52130 2015 53010
  29. 29. METHODOLOGY Theoretical framework 1. Public choice approach: • Founded in the early 1960s, public choice applies the theories, principles and methods of economics to the analysis of political processes. • Reflects 3-elements: Methodological individualism, rational choice and politics-as-exchange. • Assumes the existence of social systems in which rational self-interested actors maximize their utility subject to certain constraints. • Actors in this context are persons or groups of persons who have influence on the implementation of a tax policy. (Buchanan, 2012; Mueller, 2009; Calcagno, 2010; Rowley 2008; Hansjürgens, 2000) 2919th October, 2017 Policy process of over-aged vehicle tax in Ghana
  30. 30. METHODOLOGY 30 Actor Interests and motives Representative interviewees Voters Cast votes to maximize their utility Ghana consumer protection groups Industries Minimizes costs from regulations Ghana vehicle business groups Interest groups Those who seek material gains: minimize the burden of regulation Ghana transport unions Those who fight cause: maximize the benefit of regulation Selected civil society and environmental groups/NGOs Politicians Aim to maximize votes during elections From political arena (executive and legislature) Bureaucrats Maximizes budget/reputation Selected Ghana civil service (ministries, departments and agencies) Table 1:Typical actors, their interests and motives and representative interviewees Source: Gawel et al.(2014); Author (2013); Kirchgässner and Schneider (2003); Hansjürgens (1995) 19th October, 2017 Policy process of over-aged vehicle tax in Ghana
  31. 31. METHODOLOGY 2. Goal attainment criteria: • Goal attainment is the capacity of a tax policy to meet its goal and objectives. • It involves turning goals into measurable objectives (i.e. quantitative terms) and determining how they have been realized in practice. • Although not always the case, environmental tax policy goal(s) should be measurable, attainable, specific, time-based and relevant • Generally an environmental tax is effective if the goal it pursues is attained. (Field and Field, 2013; Endres, 2011) 3119th October, 2017 Policy process of over-aged vehicle tax in Ghana

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