The Institute of Statistical, Social and Economic Research (ISSER) has urged government to review some taxes that are affecting industry, promoting imports and worsening the unemployment and inflation situation in the country.
According to ISSER’s Director, Professor Peter Quartey, excessive taxes on production are hampering the growth and competitiveness of domestic businesses – and those on food and beverages are contributing to the rising cost of living in the country.
“Taxing production excessively is affecting industry, promoting imports and worsening the already high unemployment situation. High taxes on food and beverages are fuelling inflation, and therefore a critical review of some of these taxes is necessary,” he opined.
Professor Quartey made these remarks during his presentation on the state of Ghanaian economy report 2022 and Q3 2023 economic performance.
In a bid to ramp-up revenue mobilisation through taxes, government introduced a number of taxes and tax reforms in the 2022 and 2023 fiscal years. These tax handles have however been met with opposition from manufacturers and ecomomists.
For instance, according a survey by KPMG, 89 percent of respondents (businesses) reported an adverse impact from taxes on their operations. Businesses, the report indicated, said the current tax environment has negatively affected their operations and signalled the need for government to review the E-levy, import levies, petroleum levy and Growth and Sustainability levy in their top-5 review considerations.
A significant number (30-50 percent) believe that the 2024 budget should prioritise policies which promote local businesses and export through industrialisation, agriculture development and infrastructure development.
Against this backdrop, Prof. Quartey advised government to reduce taxes on production and broaden the tax base by implementing measures such as property rates. He argued that this would make taxes more reasonable and affordable for a larger segment of the population.
Although elevated, headline inflation dropped from 40.1 percent in August to 38.1 percent in September 2023 – underscoring the ongoing disinflation process. The disinflation process began when inflation fell from 43.1 percent in July 2023 to 40.1 percent in August, contrary to market expectations.
In the first half of 2023, inflation exhibited signs of easing; starting from a peak of 54.1 percent in December 2022 and reaching 41.2 percent in April 2023.
Prof. Quartey also highlighted the importance of maintaining fiscal discipline, stimulating productive sectors and creating employment opportunities for a stable and prosperous economic future.
He commended the agriculture sector’s resilience and expressed hope for the success of policies aimed at involving the youth in agriculture.
However, he also raised concerns about the gap between revenue and expenditure – which stands at 6.4 percent of GDP, equivalent to about GH¢5.47billion. He warned against imprudent spending habits in the run-up to the 2024 elections, which could lead to further economic challenges in subsequent years.
He also cautioned against a potential 30-40 percent haircut on Eurobonds, which could undermine investor confidence and take a long time to restore.
Government, he further suggested, should invest in stimulating productive sectors and ensure responsible borrowing practices, adding that: “Government should invest to stimulate the productive sectors and ensure responsible borrowing”.