Alex Kombat, Ghana Revenue Authority (GRA)

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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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
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. 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. 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. 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
PART 2
ASSESSMENT OF THE TAX
19th October, 2017 Policy process of over-aged vehicle tax in Ghana

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. 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. 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. 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. 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. 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. 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. 25Policy process of over-aged vehicle tax in Ghana
19th October, 2017

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. 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. 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. 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. 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. 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