The emergence of environmental taxes in Ghana—A public choice analysis

Abstract

Environmental pollution has become a huge problem in many parts of Africa. Until a few years ago, the prevalent response of African governments was the introduction of command and control instruments. This trend has changed and some African countries are now turning their attention to the use of economic instruments including taxes. One of the countries that has introduced environmental taxes is Ghana. This paper analyzes the policy processes related to the emergence and implementation of three environmental taxes in Ghana, namely, taxes on plastics, overaged vehicles, and petroleum applying a public choice approach as the framework of analysis. Overall, we find that all actors behaved as proposed by public choice resulting in environmental tax designs that do not follow what economists consider optimal. Nevertheless, the taxes contributed to mitigate environmental problems, partly because a share of the tax revenue was used for this purpose. Thus, environmental taxes have the potential to mitigate environmental problems in Africa provided functioning administrations are in place. This is, however, currently not the case in many African countries.

Can Environmental Tax Reduce Dilapidated Motor Vehicles Importation and Pollution? Insights from Dar-es-Salaam, Tanzania

“…In 2009, Republic of Kenya court of law temporally banned taxes on DMVs after a serious confrontation between the Kenya Revenue Authority and Motor Vehicle Clearing Agents. The crux of the matter was unfair criteria used to design the rate of the taxes to be imposed on the DMVs over the price rise of DMVs (Okubasi, 2020) Similarly, in 2015, the importers of DMVs in Uganda went into the street demanding their government to remove environmental taxes on DMVs imports (Reporter, 2015) Similarly, Kombat & Wätzold (2019) noted that when the Government of Ghana introduced environmental taxes on DMVs, it received fierce opposition from Association of Second Hand Car Dealers (ASCD) to the point that it succeeded to mobilize political parties and their voters to rally against the government stance on the matter. The matter was also reported to the apex body of Economic Community of West African States (ECOWAS).…”

Beyond bans: A political economy of used vehicle dependency in Africa

“…For instance, Ghana introduced the Customs, Excise and Preventive Service (Management) (Amendment) ACT, 1998 (Act 552) in June 1998 to ban the importation of all vehicles older than 10 years. The ACT was replaced four years later with the Customs, Excise and Preventive Service (Management) (Amendment) ACT, 2002 (ACT 614) that imposed penalties on over-aged vehicles exceeding 10 years (EPA, 2017; Kombat & Wätzold, 2019).…”

“…The puzzle, however, is that while such measures often result in some reductions in the number/ quantity of used vehicle import (see Ayetor et al, 2021;Sulemana, 2012), they seldom translate into public health gains in terms of reduced crash injuries, vehicular pollution, and a shift towards new less polluting eco-friendly vehicles. Consider, for instance, the outright ban and high penalties Ghana imposed on used vehicle imports in 1998, respectively (EPA, 2017Kombat & Wätzold, 2019). It has been documented that the ban resulted in a sharp reduction in used vehicle imports from 15.35% in 1998to 5% in 2003(Obeng-Odoom, 2010.…”