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Economy to rake in GH¢986m revenues

Ghana is set to record about GH¢986 million net additional revenues from import duties when the Common External Tariffs (CET) regime is implemented from January 1 next year, the Ministry of Finance has said.

The CET has been adopted by the 15-member Economic Community of West African States (ECOWAS) to replace all tariff bands (system) currently implemented by member states, after seven years of negotiations and fine-tuning among member countries after the measure was first adopted in 2006.

The common external tariff regime means that the same tariff will be slapped on an eligible item imported into the ECOWAS sub-region, irrespective of which ECOWAS-member country it lands in.

It is a vehicle to create a customs union as a complementary condition for the creation of a common market for West Africa. 

Altready, some of the provisions of the harmonised tariffs, including the reduction of import duties on mobile phones from 20 per cent to 10 per cent, have found their way into the 2015 Budget.

Under the regime, Ghana’s four-band tariff system will expand to become five band, namely, basic essential goods, primary raw materials/capital goods, intermediate goods, final consumer goods and specified goods for economic development.

A director at the Ministry of Finance, Mr Nyame Baafi, said in Accra yesterday, at a stakeholder sensitisation workshop for the media that the tariffs were to deepen the regional integration, which had so far implemented the free trade area under the ECOWAS Trade Liberalisation Scheme (ETLS).

He said the new regime would boost production in the local manufacturing sector as its incidence would lead to a reduction in import duties on most raw materials and intermediate goods from 20 per cent tariff band to 10 per cent. 

Protection for agric

At the same time, CET would protect the agricultural sector as it puts 55 per cent of agricultural tariff lines in the 20 per cent and 35 per cent bands and none in the zero per cent band; whereas 90 per cent of the products in the 35 per cent band are agricultural products

“This is an instrument to harmonise tariffs in the sub-region and in the long run tariffs among ECOWAS states will be the same. It will promote intra-regional trade and domestic production,” Mr Baafi said.

Ghana currently has 6,057 commodity lines on which it applies import duties. This will reduce to 5,899 items when the CET comes into force, an elimination of 168 commodity lines under the regional tariffs.

However, the new system will reduce the 725 commodity lines that attract zero per cent import to 85 lines, while expanding the scope of commodities admitted under the five per cent band from 375 to 2,146. 

“This signifies a big boost to local industries as these items are mainly basic raw materials that are currently taxed at 10 per cent,” Mr Baafi, who heads the Multilateral, Regional and Bilateral Unit of MoF, said.

Mr Hendrick Dwommoh-Mensah also of MoF, who presented findings of an impact assessment, said there were various sectors of the economy which would benefit from increased revenue under the new system by about 1.4 per cent more of the total value of commodity imported in 2013. 

Based on GH¢48.99 billion total imports assumed for 2015, the country would gain an estimated GH¢686 million, up by about three per cent.

Gains on exemptions

“Additionally, the CET will remove all exemptions and concessions under Chapter 98 of the Harmonised Coding System. This will improve customs revenue by GH¢300m,” he said, and added that the total revenue gain from the implementation of CET in 2015 would be an estimated GH¢986m.

Interestingly also, he said, the new tariff line of 35 per cent would apply to only 130 consumption goods, mostly food items, which Ghana presently taxed at 20 per cent. 

These items referred to as special goods for economic development due to the region’s comparative production cost advantage, include groundnut oil, palm oil, coconut and cotton seed oil. 

It will also affect meat and frozen products; cotton, yarn, woven fabric of cotton, mineral water, onion, soap, and cooking oil have all been raised from 20 per cent to 35 per cent.

Intra ECOWAS

A Chief Revenue Officer at the Ghana Revenue Authority, Dr Godfred Okoh-Appiah, explained that goods originating within ECOWAS would not attract any duties, while provision had been made for goods imported from outside the ECOWAS region to enter through any port and circulate to any member country.

However, the port of entry would share revenue with destination member countries for such free circulating goods, a formula which was currently being worked on.

Dr Okoh-Appiah also said other measures, including Trade Defence and Supplementary Protection measures, would be implemented alongside where necessary, to ensure a wholly harmonised system.

Although implementation is set to begin on January 1, 2015, harmonisation processes would be taking place within a sunset period of five years.

 

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