The Alliance for Development and Industrialisation has described as baseless and unfortunate the call from the Institute for Economic Affairs, (IEA) for government to impose more taxes on profitable and resourceful businesses in the country.
According to a press statement issued in Accra by the ADI and signed by Francis Mensah, Convener of the think-tank group, the call by the IEA lacks merit and should be treated with the contempt it deserves – saying if government should heed the IEA proposal, it will collapse more business in the country.
“In other jurisdictions, like the USA for instance, the big businesses don’t pay huge taxes because they always create opportunity for other businesses and also employ more people,” the statement said.
“Why do we want to collect more taxes from the people and use it to pay salaries when there is huge inefficiency within the country? When the international tariffs are killing businesses and you are there saying they should increase taxes, it does not add up,” it said.
According to the ADI, government should rather consider creating more tax incentives for businesses for growth of the economy. “If we don’t provide the incentives, which investor will find it attractive to invest in our economy?” the statement quizzed.
The Institute of Economic Affairs (IEA) on Tuesday said government should have imposed more taxes on profitable and resourceful businesses rather than sparing them in the mid-year budget review.
The Institute said the minister would be more successful in raising revenue to fund expenditure needs if the tax increases were directed at the booming and more resourceful businesses rather than the less resourced and overtaxed consumers.
The comments from Dr. John K. Kwakye, the Director of Research at IEA, have been welcomed by wide condemnation from business chieftains,
In a related development, the ADI is asking government to reconsider the 17.5 percent VAT rate it charges on agricultural manufacturing. According to the ADI, industries in Ghana are made to pay 17.5 percent VAT on agricultural manufacturing while importers pay a flat rate of 3 percent.
“How can this be an incentive to our local manufacturing firms, and how can this make them more competitive on Ghanaian market?
“We are calling on government to cut down the 17.5 percent VAT rate it charges on agriculture manufacturing and make it a flat rate of 3 percent – as it charges importers in the country,” it said.
“Our taxation and industrialisation efforts are on different paths, we need to synchronise the two as a country,” it said.
“If we are not careful as a country, the One District One Factory programme will suffer at the back of high taxes, because importers are being asked to pay 3 percent on finished products while manufacturers are being made to pay 17.5 percent on their unfinished produce.
“Taxes for manufacturing should be a flat rate of 3 percent, so that manufacturers can remain competitive with their peers. Ghana will lose if we don’t rationalise our tax regime to reflect the growing trend,” it said.
Government has reduced the special petroleum tax rate from 17.5 percent to 15.0 percent and further reduced it to 13 percent, converted from ad valorem to a specific tax.
It has also abolished the 1 percent Special Import Levy; the 17.5 percent VAT/NHIL on domestic airline tickets; the 17.5 percent VAT/NHIL on financial services; the 17.5 percent VAT/NHIL on selected imported medicines that are not produced locally; the 5.0 percent VAT/NHIL on Real Estate sales; abolished import duty on the importation of spare-parts; reduced the National Electrification Scheme Levy from 5.0 percent to 2.0 percent and Public Lighting Levy from 5.0 percent to 3.0 percent.