Slash in benchmark values hurt revenues

Government’s decision to slash import benchmark value by half in order to increase customs revenue seems to have rather backfired as a report by Data bank has revealed that the policy has reduced revenue generated at the ports.

According to the research dubbed ‘Ghana Quarterly Strategy Report’ which reviewed activities in the third quarter, total revenue performance was 15 percent below target, largely weighed down by collections from international trade taxes which registered a 6.8 percent year-on-year decline and a 20.6 percent shortfall compared to the first half target of 2019.

It added that the April 2019 reduction in the benchmark value for import duty computation was a drag on customs collections and it views the policy as a downside risk for the remainder of 2020. Speaking to one of the authors of the report, Courage Martey, he said the intent of the policy is a good one, hence, scrapping it will not be an idle solution; however, government must come clear on when it expects the policy to yield results.

“I think the general logic behind the policy is very clear and I align with it so I will not advocate for it to be abolished, much less within a short time where we have not given it enough time to start yielding the desired results. But then, it doesn’t also prevent us from plugging the short-term adverse consequences. It important for us to do our independent assessment and create awareness to the policy makers for them to set a certain time frame beyond which we need to start seeing the expected results.

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So the argument is not for them to abolish it and reinstate the status quo, but then to keep an eye on development both in the short to medium term; and that in the short term, there will be downside risk to revenue performance as the research showed it was the only revenue line item that contracted,” he told the B&FT in an interview.

Vice President Dr. Mahamadou Bawumia indicated in April when he announced the 50 percent reduction in the benchmark value of import duties that, the policy will lead to, at least, 50 percent increment in import volumes annually as well as an increase in customs revenue. However, revenue figures being reported by the Ghana Revenue Authority such as seen in the Data Bank report are showing otherwise.

Mr. Martey says if volumes will increase, policy measures will play a key role to redirect traffic from neighbouring ports.

“Policy measures must be put in place to redirect container traffic from the neighbouring ports back to Ghana because importers have already established a relationship with those ports and it won’t be easy for them to come just like that. Policy must bring them back here,” he said.

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