Reduction of benchmark value discount leaves local industries gasping for survival

benchmark value discount leaves local industries gasping for survival
President of GUTA, Dr. Joseph Obeng (left), Head of Marketing at Avnash, David Selorm Adikah (middle), and former president of GIFF, Joseph Agbaga(right) debate new benchmark policy

Local industry players have described the recent reviewed discount rates of the benchmark value policy by government as unsatisfactory, leaving local industries gasping for survival.

David Selorm Adikah, who represented the Association of Ghana Industries  (AGI) on Eye on Port live program, reacting to the new discount figure, said,  the previous 50% discounts placed on the duties of imported goods, gave traders of such goods an unfair advantage, running local industries to the ground.

“In the edible oil industry, at 50% discount, we went -13% below the imports, at 30%, its now -9.2%. We want a level playing field or an advantage over importation. This gradual change we are being asked to embrace, does not do much,” Mr. Adikah lamented.

“At 100% import duties, local manufacturers had an advantage of only 4% in terms of price, over imported goods. The introduction of that policy, the cost of imported finished goods immediately went below what we make in the country. We had no chance to compete.”

Mr. Adikah, who is the Head of Marketing at Avnash Industries Ghana Ltd, revealed that the only lifeline they survived on was the export market of ECOWAS, which remains uncertain.

According to him, it is not unusual for government to provide preferential treatment to its local manufacturing companies, as it is the practice in most growing economies.

“Indonesia is the leading producer of palm oil. If you are lifting crude palm oil from Indonesia, you are paying a lower export levy on the finished goods as opposed to crude palm oil. They are doing this because they want to keep the crude palm oil in the country and create jobs in the edible oil refineries in their country. They discourage people from exporting the crude oil by slapping heavy taxes. That’s an example of a deliberate policy to grow local industries.” Mr. Adikah cited.

It will be recalled that over the past year or two, the various trading associations have expressed polarizing views on the benchmark value policy introduced by government in 2019.

Local wholesalers and retailers of goods had maintained that the policy has been beneficial to business, whereas local industries argued they were being negatively affected by the policy.

Following the year-long brouhaha on the benchmark value policy, government has reached what can be said to be a middle ground by reviewing the policy.

As it stands, the benchmark value reduction on general goods, has been reduced by 30%, against the previous 50%, whereas the home delivery value of vehicles is discounted by 10%, against the previous 30%.

The President of the Ghana Union of Traders Association, Dr. Joseph Obeng, on his part, described the new benchmark value discount rates as reasonable.

“It is a win-win situation for all of us, including our brothers from AGI. They have their bits, we have our bits, the consuming public have their bits and government can also shore up its revenue collection. We have to accept it and move on even though at the meeting people thought the discount on cars should be higher. But we understood we cannot have it all our way,” the GUTA President expressed.

He praised government’s all-encompassing approach to arrive at the new dispensation.

Dr. Obeng said “government found it necessary that they suspend the benchmark reversal policy and give way for broader stakeholder engagement.”

The President of GUTA, however, rebuffed the position of the AGI and insisted that local industries should redirect their energies into soliciting for incentives that would reduce cost of production.

He emphasized that local manufacturing companies should prioritize the production of products they have competitive advantage in.

Dr. Obeng said, “our AGI rep is talking as if all is gloomy, and all companies are not doing well. I must say there are companies doing marvelously well and we are purchasing those goods. For example, plastics, biscuits, floor tiles, pharmaceuticals, etc are more attractive to purchase here than travelling for it. Government will not surcharge the good people of Ghana because one or two companies are struggling to be relevant.”

Taking his turn on the subject, a former President of the Ghana Institute of Freight Forwarders, Joseph Agbaga interrogated the method of benchmark valuation in itself.

Mr. Agbaga articulated that, “in my own literature and all the literature that I have read concerning valuation of goods for customs purposes I have not come across any method known as benchmark valuation method. In fact, the customs Act 891 2015 section 67 outlines the methods of valuation modeled after the WTO agreement on customs valuation and that is what I know. If benchmark is a new introduction or terminology, I’m yet to come to terms with that.”

He was of the opinion that government could have applied discounts on the Value Added Tax instead.

VAT is a domestic tax, and we have all the commands to reduce it

Joseph Agbaga however noted that the achievement of the customs revenue target could be attributed to the benchmark value policy.

He was also of the opinion that the concerns of manufacturers should be other tax components that contribute to the high cost of doing business.

The veteran freight forwarder indicated that, “we can talk about the cost of electricity, water, the machinery that we use to manufacture, and also some of the taxes that they pay in the recourse of their business.”

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