2.5 per cent VAT increase divides Parliament

BY: Emmanuel Adu-Gyamera/Daily Graphic/Ghana

Parliament yesterday passed the Value Added Tax (VAT) Bill, 2013 and, in the process, increased the current rate of the tax from 12.5 per cent to 15 per cent.

But the Minority, who felt ambushed by the increase in the tax, walked out of the House before the First Deputy Speaker of Parliament, Mr Ebo Barton-Odro, pronounced the bill passed.

There was chaos as a result of a shouting bout when a Deputy Minister of Finance, Mr Ato Baah Forson’s last-minute proposed amendment of Clause 3 of the bill resulted in the VAT increase to 15 per cent.

Clause 3 of the bill, before it was amended, read: “Except as otherwise provided in this act, the rate of the tax is 12.5 per cent and calculated on the value of the taxable supply of goods and services or on the value of the import.”

The bill, which was introduced to the House in July, this year, had gone through all its processes of passage: that is, the first and second readings and the consideration stage and was ready to go through the third reading and pronounced passed yesterday.


 But the Chairman of the Finance Committee of Parliament, Mr James Klutse Avedzi, called for the bill to go through a second consideration stage, which paved the way for Mr Forson to propose the amendment for the increase in the rate.

With that, the 2.5 per cent increase translates to 20 per cent when its comes to the goods and services which attract VAT.

 

The Amendment

Proposing the amendment, Mr Forson said Ghana was now a middle-income country and, therefore, the availability of concessionary loans, aids and grants was considerably reduced.

The cost of borrowing, according to him, was higher on the world market, adding that Ghana must strike the balance between external borrowing and internal resource mobilisation.

He said VAT was a mechanism that would enable the country to raise resources, emphasising that the bill exempted basic foods, aquatic products, animal, transport, health and educational materials.

Mr Forson explained that the 2.5 per cent increase would enable the government to raise an additional GH¢745 million a year to support the capital development portion of the 2014 budget.

“From 2015 onwards, the whole amount will be put into an infrastructural development fund from which investment projects will be funded,” he explained further.

Without much debate on the matter, Mr Barton-Odro put the question and ruled for the amendment to become part of the bill.

Not satisfied with the haste with which the amendment had been carried out, the Minority raised the question of procedure, but the Majority Leader, Dr Benjamin Kunbuor, explained that there was no need for amendments during the consideration stage of a bill to be seconded.

In the ensuing melee, MPs from both sides of the House started shouting and pointing their hands at one another.

It was at that stage that the Minority, led by its Leader, Mr Osei Kyei-Mensah-Bonsu, walked out.

Notwithstanding their action, the Majority passed the bill.

 

Minority press conference

Soon after walking out of the chamber, the Minority organised a press conference to explain why it took such an action.

Mr Kyei-Mensah-Bonsu described the increase in the VAT rate as “a day of shame”, explaining that there was nothing in the bill which gave an indication of the government’s intention to increase the rate of the tax.

“We were supposed to conclude the consideration stage yesterday, yet they brought a nocturnal addendum to increase the rate of the VAT. This is dangerous,” he said, adding that the inclusion of the National Health Insurance Levy would increase the levy to 17.5 per cent.

He wondered why the Majority decided to spring the increase on the Minority as a surprise.

“There is massive corruption in the system. They should tell us what they are doing to plug the loopholes. That is our concern,” he charged.

“We have washed our hands off the increase in the rate, hence our decision to withdraw from the deliberations. The Speaker’s conduct is most reprehensible,” he said.

The Minority Spokesperson on Finance, Dr Anthony Akoto Osei, said the issue was not discussed at the committee level, adding that no motion of amendment was proposed by anyone.

“It is worse than a military dictatorship. You don’t set a precedence that undermines the authority of Parliament,” he stated.

 

Majority Leader’s explanation

Speaking to the press later, Dr Kunbuor said notwithstanding the increase, Ghana was among the lowest VAT rated countries in the world.

He explained that Burkina Faso was charging 18 per cent; Burundi, 18 per cent; Cameroon, 19.2 per cent; Central African Republic, 19 per cent; Egypt, up to 25 per cent; Gabon, 18 per cent, and Morocco, 18 per cent.

He said Ghana should have increased the rate of VAT last two years, adding that the government needed to increase the rate before the presentation of the 2014 budget.

He described the Minority’s action as regrettable, saying that they did not use the proper channel to walk out of the House to ensure that their action was captured by the official report of proceedings of the day.

Dr Kunbuor said there was no breach of procedure as had been indicated by the Minority and expressed the hope that there was still room for dialogue.