Businesses cry for tax reforms

Other tax constraints include the payment of stamp duties by companies that increased their capital base, a situation that has discouraged many a company from raising funds from the capital market, the stock exchange.

The AGI members urged the government to exempt companies with consistent good records of tax payments from paying withholding taxes to free resources for their business operations.

“These exemptions and other enhanced tax reforms will help to make funds available for business operations in the industry where lack of capital has always been a problem,” the President of the association, Nana Owusu Afari, stated.

He said the sector, often regarded as the engine of growth of the economy, was currently reeling from stringent taxes which tend to lock up their working capital and stifle business operations.

Paramount amongst these are withholding taxes, which are certain percentages of incomes of businesses paid to the government as part payment of taxes; and the implementation of VAT refunds and Duty Draw backs for exporters and manufactures, which locks up heaps of refunds and tax credits due businesses, leaving them to wait in queue almost forever.

The Ministry of Finance and Economic Planning acknowledged delays in paying VAT refunds and duty drawbacks in this year’s budget presented to parliament on November 16, 2011 and promised that there would be enough resources available for refunds and duty drawbacks in the 2012 fiscal year.

According to the budget, “the implementation of the VAT refunds and duty drawbacks is encountering problems of delayed payments. The Ministry of Finance and Economic Planning will ensure that there are enough resources available for refunds and duty drawbacks.”

It added that “ultimately, the GRA in its administrative improvement will adopt an accounting system that will allow taxpayers to offset such refunds against other tax obligations.”

Less than a year down the line, the private sector has again registered its displeasure over the situation which makes the business climate uncompetitive.

The President of the Ghana Association of Industries (AGI), Nana Owusu Afari said while late admissions of VAT returns attracted a penalty, there was no compensation for locking up funds due businesses under the drawback and VAT refund schemes, at least, to offset the depreciation of the cedi and inflation.

He thus called for the “reintroduction of credit notes for companies which are eligible for duty drawbacks and the credit notes processed within a maximum 30 days.”

The mining sector, for instance, at the beginning of the year had its corporate tax increased from 25 per cent to 35 per cent and capital allowance period reduced from 10 years to five years and the depreciation rate from 25 per cent to 20 per cent. This alone means the tax obligation of the mining concerns will go up. The 2012 budget also proposed a 10 per cent windfall tax, which has not yet been implemented.

Many consider the country’s income taxes as punitively high, although the 2012 budget increased the tax bands.

Last year, the government collected taxes amounting to 16.5 per cent of Gross Domestic Product (GDP).

Although the figure is above peer sub-regional countries’ average of 15 per cent, it is below what a lower middle income country should attain – an average of 18 per cent of GDP.

But a Chartered Economist, Mr John Gartchie Gatsi, said the country’s tax regime should be placed in context, considered low when viewed against advanced countries such as the United States, Europe and United Kingdom as well as socially inclined economies such as Scandinavian countries like Norway.

However, viewed against neighbouring countries, it would be appropriate to conclude that Ghana's tax regime and tax rates were high.

Mr Gatsi, who is also a Fellow of the Association of Certified Chartered Economists (ACCE), told the GRAPHIC BUSINESS in a separate interview that Ghana’s challenge was with inefficient economic system where the vast majority of the people were not engaged in viable economic activities that could translate into more taxes for the government to make for a larger tax bracket and a lowering of the tax rate.

 “So the government is forced to collect taxes from only the formal sector and since not much information and communications technology (ICT) is infused in tax collection, the net will not be wide enough,” he explained.

The economist therefore called for a proper national identification system that identifies everybody in the system and which should be integrated into other systems to make for better tracking and monitoring.

While lauding the automation currently going on at the Registrar General’s Department and the Ghana Revenue Authority, he said those systems should have been preceded by a properly working national ID system.

The AGI/GRA forum, an annual platform for business operators to meet with the revenue agencies to discuss various challenges and suggest solutions, was on the theme, “Creating partnerships for Local Content Development towards accelerated industrial growth”.

The GRA Commissioner in Charge of Support Services, Mr Anthony Minlah, said, the essence of local content development was to see the country grow and which can only be achieved by adding value to locally manufactured products.

He said if the country was able to grow, then it could achieve the much needed accelerated industrial growth, which would help absorb graduates into the job market.

The GRA, he said, was having some challenges in meeting its revenue target for the 2012 budget which expected the authority to expand the tax base and improve efficiency of tax administration.

He was quick to add however that the GRA was in consultation with stakeholders to look at these gabs and inadequacies and address them accordingly.

The Head of Food Inspectorate Department of the Food and Drugs Board (FDB), Mr Ebenezer Kofi Essel, stressed the need for businesses to adopt good manufacturing practices to avoid problems with the FDB which tended to make them appear unfriendly to the public.

According to him, although the board is mandated to support the local companies, it would not compromise on its responsibility and therefore companies found wanting would be dealt with accordingly.

Reacting to concerns of the influx of shoddy goods and locally manufactured herbal drugs on the market, Mr Essel said public health safety was a shared responsibility and thus called on consumers to desist from patronising such prducts.

“We will do our best despite the constraints and limitations we have by providing our support to consumers. We will not be everywhere and that is why we empower consumers so they know what they want,” he stated.

With respect to imported items, Mr Essel said there were officers at the ports who worked through the Customs Exercise and Preventive Services (CEPS) to ensure that goods coming in were registered, evaluated and considered fit for the market.

“Anything short of this leaves the authority with no option than to destroy the items or re-export the goods to the country of origin.” GB