The Alliance for Development and Industrialisation (ADI) has described as baseless the call by the Institute for Economic Affairs (IEA) that the government should impose more taxes on profitable and resourceful businesses in the country.
According to a press statement issued in Accra by the ADI and signed by Francis Mensah, the Convener of the think tank, the call by the IEA lacks merit.
The statement noted if the government should consider the IEA proposal, it would collapse more businesses in the country.
“In other jurisdictions, like the USA for instance, the big businesses don’t pay huge taxes because they always create the opportunity for other businesses and also employ lager people,” the statement said.
“Why do we want to collect more taxes from the people and use it to pay salaries when there is huge inefficiency within the country? When the international tariffs are killing businesses, and you are there saying they should increase taxes, it does not add up,” it asked.
According to the ADI, the government should rather consider creating more tax incentives for businesses for the growth of the economy.
“If we don’t provide the incentive, which investor would find it attractive to invest in our economy?” the statement quizzed.
The IEA on Tuesday said the government should have imposed more taxes on profitable and resourceful businesses rather than sparing them in the mid-year budget review.
The Institute said the Minister would be more successful in raising revenue to fund the expenditure needs if the tax increases were directed at the booming and more resourceful businesses rather than the less resourceful and overtaxed consumers.
The proposal by Dr John K. Kwakye, the Director of Research at IEA, has been criticised.
In a related development, the ADI is asking the government to reconsider the 17.5 per cent VAT rate it charges on agricultural manufacturing. According to the ADI, industries in Ghana are made to pay 17.5 per cent VAT on agricultural manufacturing while importers pay a flat rate of 3 per cent.
“How can this be an incentive to our local manufacturing firms, and how can this make there more competitive on Ghanaian market”
“We are calling on the government to cut down on the 17.5 per cent VAT rate it charges on agriculture manufacturing and make it a flat rate of 3 per cent as it charges importers in the country”, it said.
“Our taxation and industrialisation are on a different path, we need to synchronize the two as a country”, it said.
“If we are not careful as a country, the One district one factory program would suffer at the back of high taxes because importers are being to pay 3 per cent on finish products, while manufacturers are being made to pay 17.5 per cent on their unfinished produce.
“Taxes for manufacturing should be a flat rate of 3 per cent so that manufacturers could remain competitive with their peers. Ghana would lose if we don’t rationalize our tax regime to reflect the growing trend” it said.
The government has reduced the special petroleum tax rate from 17.5 per cent to 15.0 per cent and further reduced to 13 per cent, converted from ad valorem to specific tax.
It has also abolished the 1 per cent Special Import Levy; the 17.5 percent VAT/NHIL on domestic airline tickets; the 17.5 percent VAT/NHIL on financial services; the 17.5 percent VAT/NHIL on selected imported medicines, that are not produced locally; the 5.0 percent VAT/NHIL on Real Estate sales; abolished import duty on the importation of spare parts; reduced National Electrification Scheme Levy from 5.0 percent to 2.0 percent and Public Lighting Levy from 5.0 percent to 3.0 percent.