News Guide Africa

Tag: Businesses in Ghana

  • Businesses overwhelmed with taxes.. call out on gov’t to save jobs and investments

    Adnan Adams Mohammed

     

    Some Business owners in the country have since been on government to reconsider numerous taxes they pay right from source of their raw materials through import duties to production, packaging and selling their finished goods.

     

    The business captains claim government is deliberately targeting them as the soft-spot for its revenue mobilisation because they are formalised.

    Businesses owners have intensified their calls on government to either review or scrap some of the taxes.

     

    After several attempts to get the government’s attention to scrap the COVID Health Recovery Levy from the list of taxes businesses pay, President Nana Akufo-Addo recently pleaded with Ghanaians to keep paying the Covid-19 levy despite the pandemic was declared over.

     

    “The COVID Health Recovery Levy that was introduced to help fill some of the expenditure holes might not be the most popular tax, but I entreat all of you to bear with us”, the president pleaded.

     

    However, the Ghana Union of Traders Association (GUTA) has said it is not opposed to government’s increasing its revenue rather they want the Covid-19 levy expunged.

     

    The President of GUTA, Dr Joseph Obeng, explained that the association is not opposed to taxes including the e-levy, noting: “The e-levy, as it is structured now, is OK, and will help expand the tax net but the Covid levy is what needs to be taken out of the table to help lessen the burden of businesses.”

     

    The GUTA president noted the Covid levy “is deemed as a nuisance tax now that the Covid era is over.”

     

    The government imposed the covid levy on the supply of goods and services and imports to raise revenue to support Covid-19 expenditures and to provide for related matters.

     

    Within eight months of coming into implementation, the levy accrued GH¢773.93 million, according to fiscal data released by the Ministry of Finance on 22 April 2022.It was 12.7 percent lower than the budget target of GH¢889.07 million. In 2021, expenditures on Covid-19 and related issues, totalled more than GH¢2.8 billion.

     

    Additionally, the Association of Ghana Industries has called on government to reconsider its current calculation of Value Added Tax (VAT) on indigenous companies whose annual revenue exceed GHS 500,000 per annum to reduce the economic burden on local industries.

     

    According to them, per the current calculations of 15 percent VAT and the summation of the COVID levy, GETFUND and NHIS levy amounting to 6% coupled with other cost of production were negatively impacting the growth of local industries.

     

    The Greater Accra Chairman of AGI, Tsonam Akpeloo impressed on government to relook the development.

     

    “The way the VAT is being calculated currently means that we are being charged double or we are paying VAT on VAT. This essentially means that government adds the levies i.e. NHIS, the Covid and GETFund which is totaling 6 percent to cost of the products before applying the VAT and the other levies again,” he said.

     

    “In effect, one business, one transaction we have to pay double tax and this calculation is not helpful. Already Industries are struggling, there is no point in getting them to pay tax in this manner so we want government to reconsider its computation and reverse it to the time before 2017,” he appealed.

     

    In November 2022, Government announced its decision to increase the Value Added Tax (VAT) by 2.5 percent.

     

    This moved the tax policy from its previous percentage of 12.5% to 15%.

     

     

    Adding his voice to the tax burden on businesses, the Chief Executive of AGI, Seth Twum Akwaboah, has called for a reduction in duties paid on raw materials used in printing and packaging in the manufacturing sector.

     

    According to him, this is necessary to cushion local producers and contribute to exports and development.

     

    “When you import raw materials to print, you pay duty on it but when you import the finished product, you do not pay duty on it and it makes the local printing more expensive than importation. So we think that this policy is not helping local producers and if we want to create jobs and grow the economy and reduce our dependency on imports and protect the local currency, these are some of the things we have to look at,” he said on the sidelines of the opening of Propak Exhibition and trade conference in Accra, last week.

     

    Mr Twum Akwaboah called on government to review some outdated trade policies to give a boost to local producers within the printing, packaging and labeling space.

     

    The Association explains that with the growing presence of industrial revolution in the country, local producers have built their competences to meet the demand of clients and society.

     

    “The Florence Convention which was a convention signed in the 1850s because at the time we didn’t have sophisticated printing presses in Ghana. So to encourage one to bring in the learning materials, the duties were taken off: at that time it made a lot of sense but unfortunately this law has stayed with us up till today. While we have moved on in terms of capacity to print,” he noted.

    “We also have some sophisticated printing firms in Ghana now and duty of imports of raw materials continues to persist so we believe that kind of policies is not helping local producers and it should be looked at,” he added.

     

    Consequently, some investors within Ghana’s automotive industry are asking government to explore various options in addressing the high taxes in the country, impacting on their business.

     

    This, they say is affecting their cost of operations in the importation of components for assembling vehicles in the country.

     

    According to Chief Operations Officer of Rana Motors, Kassem Odaymat, the prospects for the automotive industry are positive, but more work needs to be done to attract investors.

     

    “The automotive business as a whole, any tax introduces affects us in a way because our business model is not just assembling of cars but we do other things like tyres, car batteries and other components”, he said in an interview last week.

     

    “I won’t say there are too many gaps but we have some that need to be relooked at. The economy now is not favourable, but we hope things will be fine”, he said.

     

    Mr Odaymat, however, maintained that the automotive industry in Ghana has a positive outlook and as a result, it should be attractive enough to bring in more investors.

     

    Government in 2019 said it will offer tax breaks of up to 10 years to automakers that set up local manufacturing plants, as it seeks to attract international companies such as Volkswagen AG and Nissan Motor and co.

     

    Ghana’s move at the time was to lure carmakers from some African countries which had attracted seven manufacturers including Renault, Nissan and Toyota with tax incentives.

     

  • Analysts predict tougher times ahead for the economy and businesses

     

    Adnan Adams Mohammed

     

    Some analysts are predicting tougher times ahead for the economy arguing that businesses looking to expand this year will face very severe challenges.

     

    According to a business analyst, David Ofosu-Dorte, while many businesses had not envisaged such a harsh economic terrain coming into the New Year, the prevailing crisis means companies would have to adapt and probably shelve some of their plans in order to weather the storm.

     

    They emphasized that, the ongoing domestic debt exchange will deprive businesses of key financing support as a result of the liquidity problems it will create for banks in the coming months. To corroborate this, a financial analyst has also shared that, government seems not to have thought through this debt exchange programme thoroughly; the economic contraction implications are dire!

     

    “There will be a general slowdown of the economy and we will either not grow as anticipated, or, perhaps, even not exceed 2% GDP growth this year”, former Executive Director of Standard Chartered Bank, Alexander Kofi-Mensah Mould, in an interview last week said.

     

    “This will be due to less demand, which means that there will be less production, fewer imports, and fewer services being given to the populace.”

     

    Mr Dorte speaking during a TV discussion explained that, “Most businesses don’t expand using returns on bonds except the financial sector. Businesses expand using loans and debt instruments or other corporate financing instruments that they take.

     

    “The challenge is that the banks are going to have liquidity problems, so you will still not be able to do that expansion because the banks will not be giving you the money or the cost of that borrowing will be so outrageous that you’ll not be able to make returns on it so definitely expansion programmes are going to be very very difficult.”

     

    He added that even for businesses that have other sources of income, borrowing for expansion will still be very difficult.

     

    “And if you reduce it to GDP terms, the government’s own expectation of GDP is not that bullish because if businesses are not growing and expanding then we are going to have a situation where we are going to contract. There will be some growth but I don’t expect very bullish growth,” he said.

     

    Consequently, “Now, what does this mean for government revenue?”, Mr Mould asked rhetorically.

     

    “Since the demand of goods and services will go down, it means people will be paying less taxes. Additionally, due to reduced demand – a result of less discretionary expenses – there be fewer imports and as such there will be less duty and other excise taxes collected at the ports.

     

    “So, government revenue will plummet and they may fall short of making the projected revenue in the approved budget.”

     

    The finance and energy analyst further expunged that, the Debt Exchange, if carried out in its current form, will result in many banks not getting any income from Government Treasury Bonds they hold for almost 15 years.

     

    “In some cases, this forms up to 60% of their revenue and is a huge contributor to their profits! To be blunt most banks will be making losses when you combine this loss of income to the high default rate on loans to SMEs and corporates.”

     

    This implies that, with lower than expected revenue, Government will have no other option than to cut down its expenditure.

     

    The first to go will be discretionary expenditure and other non-productive policy programmes.

     

    He said, “We also expect a reduction in the construction of new roads as well as a slowdown in road maintenance, and a lot of non-essential government workers’ salaries being delayed or not paid at all, i.e more expenditure accruals.

     

    “Furthermore, with the statutory payments, like pension contributions, the situation will be worse than it currently is, that is,  government backlog of unpaid pension contributions of government workers.

     

    “Government needs to re-visit this debt exchange program and create policies that will bring back confidence in the economy, as well as attract investment to spur on the economy; resulting in more spending and increased savings.”