Reverse beverage industry excise tax policy - GFL, AGI to govt

The Ghana Federation of Labour (GFL) and the Association of Ghana Industries (AGI) have appealed to the government to reverse the excise duty on fruit juices and sweetened beverages to save the industry from imminent collapse.

In separate petitions to the Minister of Finance, Dr Cassiel Ato Forson, the two labour unions said the imposition of excise duty on those products had led to a deterioration of the fruit juice and sweetened beverages industry.

The GFL 's petition was dated January 22, this year, and signed by its while that of the AGI, dated February 5, was signed by the Chief Executive Officer (CEO) of the association, Seth Twum-Akawboah.

In its petition, the GFL stressed that the fruit juice industry was suffocating as a result of the “multiple and enhanced taxes imposed by the government”.

The association said aside from “the bloated excise duty the fruit juice and sweetened beverages industry paid 16 other taxes, including Import duty, import value added tax (VAT), ECOWAS levy, special import levy, Ghana Export-Import Bank (EXIM) levy, Ghana Education Trust (GET) Fund import, and network charge GETFund levy”.

“In consequence, the sector industry has not been able to market elevated prices of products and ultimately caused job losses,” it added.

Context

In 2022, the government introduced the Excise Tax (Amendment) Bill 2022, slapping a 20 per cent excise tax on locally produced mineral water and beverages and, a further five per cent special levy on profit before tax on all companies to be known as growth and stability levy.

Local manufacturers, the GFL and the Association of Ghana Industries (AGI) petitioned Parliament to suspend the bill before the House for broader consultation with stakeholders.

However, the GFL said imposing a 20 per cent excise tax on some products, including sweetened beverages, needed an urgent review given that local manufacturers were already grappling with at least 17 different taxes.

The GFL and AGI had argued that the increment of the policy rate to 28 per cent by the Bank of Ghana, 2.5 per cent increment of the Value Added Tax (VAT), 30 per cent increment in electricity tariffs and about 50 per cent on water on industry, effective February 1, 2023, combined to increase the cost of doing business in the country.

Despite the appeal by the GFL, AGI and other labour unions, the previous government implemented the Excise Duty (Amendment) Act 2023 (ACT 1093). 

Justification for reversal

In the latest petition to the current government, Mr Koomson made the case that local businesses were already at the edge of operating with financial deficiency and unsustainability because of “uncontrollable external pressure coming from the imposition of the obnoxious excise duty tax on sweetened and fruit drinks under Excise Duty (Amendment) Act 2023 (ACT 1093).”

Explaining the situation to the Daily Graphic, Mr Koomson said two years after the coming into effect of the excise tax law, the manufacturing sector of the beverage industry was faced with “extraordinarily high taxes, which hinder competitive production and distribution.”

He noted, for instance, that over 54 per cent of the price of juice was tax, “but it is not a luxury item and supposed to be an affordable product for children.”

Again, he said because of the imposition of the excise tax, investors in the beverage industry were faced with the challenge of wasted or idle investment capacity, “gradually wading into investment waste without any hope for the future”.

“Current production levels are around 38 per cent of installed capacity, and this is not good for the sustainability of any business,” he stressed.

The GFL secretary-general also said the dire financial situation of the beverage industry had led to forced labour retrenchment, with hundreds of workers already laid off since the introduction of the excise amendment law.

“We have had several engagements with the sector employers with the view to impressing upon them to consider alternative measures to curtail the lay-off of workers, but to no avail. The employers stress the Excise Duty (Amendment) Act 2023 (ACT 1093), which makes it impossible for any decision to retain employees,” he added.

Way forward

In the current circumstance, Mr Koomson said it was proper for the government to consider removing the excise tax policy to save the beverage sector from imminent collapse.

He noted that should the tax be removed, it would help to drive down prices and promote good and reliable trade turn. 

“Ultimately there will be a positive impact on government revenue mobilization, as sales will sharply increase and ultimately promote growth and development in the sector,” he added.