Passage of 2 excise bills on hold — Govt revenue target threatened
Parliament is yet to take action on the government’s request for revisions to two excise laws after the bills were presented to the House in December last year.
The two bills, the excise duty amendment bill and the excise tax stamp amendment bill, seek to revise tax rates on tobacco, alcohol, spirits, carbonated drinks and water (especially the bottles) upwards when amended.
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The government in the 2023 budget statement presented to Parliament in November last year proposed an excise tax reform which included a revision to the taxation of cigarettes and tobacco products to align with ECOWAS protocols.
The reform will also target an increase in the excise rate for spirits above that of beers. There will be taxation of products such as imported electronic smoking devices and liquids, which are not currently taxed.
Despite the bills going through first and second readings, they are yet to receive the needed attention from the Members of Parliament (MPs) three months into the year.
This phenomenon is likely to affect the revenue target of GH¢105 billion for the year as the MPs continue to delay the passage of the two bills.
GRA’s position
An Assistant Commissioner of GRA, Dr Alex Kombat, at a press conference by the Vision for Alternative Development (VALD-Ghana) in Accra, observed that the Ghana Revenue Authority (GRA) wants the bills passed into law to help it meet revenue targets of GH¢105 billion.
He said passage of the bills would also help reduce consumption of these products drastically and avert tobacco, alcohol and sugar-related diseases and death.
He noted that the continued delay in passing the bill would negatively affect its target and revenue inflow since all these taxes were targeted revenue to be collected during the year effective January 1, 2023.
“GRA, therefore, finds the press conference timely and is in full support of the bills.
“It is our hope that the tobacco mixed regime will rake in the needed revenue and reduce consumption of the products. We are all aware of the harmful effects of the five groups of products that attract excise taxes in Ghana,” he added.
Harmful products
The five groups of products that attract excise taxes in Ghana namely tobacco, alcoholic beverages, spirits, carbonated drinks and water (especially bottles) pose huge harm to consumers.
For instance, tobacco-related illnesses account for three per cent of all deaths in the country. It costs the country GH¢668 million every year, equivalent to 0.2 per cent of the annual gross domestic product (GDP) to take care of tobacco-related illnesses.
Alcohol consumption is considered the leading cause of death in Ghana with over 200 health conditions linked to harmful alcohol use. In fact, every day someone dies of an alcohol-related disease in the country.
Diabetes-related deaths are about 3.4 per cent of total deaths.
There are also environmental dangers associated with plastic usage/litter and fuel consumption.
Measures of deterrence
Generally, people continue to consume these harmful products because they are not expensive enough and so the government through GRA has seen the need to put taxes on them to increase their prices to deter people from consuming them in large quantities.
In fact, over the years, GRA has used excise taxes, customs duties, value-added tax (VAT) and National Health Insurance Levy (NHIL) at the entry point and at the domestic front to discourage consumption of these products.
In terms of excise tax, GRA has used either specific tax or Ad Valorem on these products over the years.
Currently, Ad Valorem excise rates for tobacco products, including cigarettes, cigars and snuff are between 170.65 per cent and 175 per cent of CIF.
Water on the other hand attracts between 17.5 per cent for mineral water and 17.5 per cent for distilled water.
Despite these taxes, the needed revenues are not being derived, as well as the needed impact on consumption of the products; hence, the need to revise tax rates of some of the products upwards.
It is part of measures to help rake in the needed revenue and check the smuggling of these products, GRA introduced the excise tax stamp last year.
GRA excise revenue increased from GH¢731.65 million in 2021 to GH¢830.52 million in 2022 an increase of 14 per cent.
Non-communicable diseases
The Executive Director of VALD-Ghana, Labram Musah, said: “We are delighted that our Members of Parliament largely spoke in favour of the proposed bills, during the second reading of the bills.
“We appreciate the fact that, apart from the revenue the government would accrue to advance social and economic development, the debate for the proposed excise tax largely centred on the health consequences leading to the increasing rate of non-communicable diseases (NCDs),” he said.
The rise in NCDs was a result of the affordability of tobacco and alcohol, leading to diseases such as diabetes, cancers, cardiovascular diseases, heart disease, liver and lung diseases and mental health.
Negative health impact
The Executive Director of Revenue Mobilisation Africa and Member of Tax Justice Coalition, Geoffrey Kabutey Ocansey, said passage of the bills would help reduce the negative health impact of the five products on society.
“For instance, tobacco usage affects the poor and vulnerable in society more than the rich,” he added.
Expedite actions
There is a need for Parliament to expedite actions on the bill to help avert tobacco, alcohol and sugar-related diseases and death.
Passage of the bills would help support the government’s fiscal consolidation process, including permanent revenue measures with an estimated total yield of 1.35 per cent of GDP.