Adnan Adams Mohammed
Some stakeholders have taken a swap against government’s decision to hike the Valued Added TAX (VAT) rate by a 2.5 percent.
They believe it will add up to the already unbearable cost of doing business in the country amidst the harsh economic hardship being experienced in the country owing to the hyper-inflationary trend and worst performance of the local currency.
Accounting firms, KPMG and PwC believe the imposition of an additional 2.5% VAT on standard-rated supplies would impact cost of doing business in the country. They, therefore, want government to focus more on compliance measures to ensure that those outside the tax net are brought in.
According to Tax Partner at PwC, Abeku Gyan-Quansah, most of the levies in introduced previously are not in compliance with the Earmarking Funds and Realignment Act.
“Let’s reform the VAT, the VAT is simply not working. We can have a standard accumulative VAT rate of 20% and make a claim for it totally. The levies and things you are doing is not in compliance with the Earmarking Funds and Realignment Act” speaking at the PwC 2023 Post Budget Forum, AbekuGyan-Quansah called for the revision of the tax laws.
In its post budget analysis, KPMG indicated that, “In these difficult times, increasing VAT will worsen the plight of taxpayers, leaving them with little disposable income”. It stressed that compliance is the way to go because it can rake in more revenue.
Also, an Executive Member of the Association of Ghana Industries, Charles Atuahene, have expressed worry about the increase in VAT, it is too aggressive which could stifle growth of the manufacturing tax.
“How long am I going to throw money that I have invested in the capital item, because the foreign exchange laws regime means that, liquidity is going out? Now my tax is going away and you say I should still give cash, where am I going to cash from and pay the tax”.
Meanwhile, Deputy Minister of Finance Abena Osei Asare stated that these tax measures are aimed at restoring macro-economic stability in the short to medium term.
“The 2023 budget was prepared with the view to bringing our debt levels to a sustainable level. Looking at all these things and government wanting to stabilize the economy first and then transform, certainly you will see some measures put in place to achieve this”.
But, Associate Professor at the Institute of Statistical Social and Economic Research, Prof. Charles Ackah believes government must focus heavily on agriculture to bring the economy back on track.
Meanwhile, Senior Partner at PwC, Vish Asghiagbor is urging businesses to be innovative in this austere moment to stay competitive in the market.
“Look I mean we are in a different period and none of us can escape those difficulties, so there is stress on businesses. At this point in time, businesses really have to think critically and be innovative on how they achieve cost efficiencies and how they leverage whatever competitive advantage they have in the market to grow their businesses”.
On other tax policies, KPMG believes that reducing the e-levy to 1% is a great idea but removing the threshold may wipe off the effective impact of the reduction.
“The situation of the vulnerable that were being protected when the law was passed has even become worse because of the current economic hardship. Government must reconsider the removal of the threshold”.
“Other areas government could consider is to place a cap on the levy based on a defined transaction threshold and consider other proposals for review of the exclusions under the levy to further enhance usage of digital payment platforms”, it added.
For some indirect tax measures, government intends implementing Customs Tariff with the 2022 version of the Harmonised Commodity Description and Coding System (HS Code) to enhance uniformity of trade within the region.
KPMG said there have been several discussions on the full restoration or withdrawal of the benchmark values.
“While others are of the view that withdrawal would make imports expensive and thus increase prices, it is also expected that withdrawal of the policy would boost local production to support our local industries”.
To be successful with this policy, it urged government to engage all stakeholders to reach a pragmatic consensus.
