Don’t implement popular but hurtful policies - Seth Terkper

Don’t implement popular but hurtful policies - Seth Terkper
Date: 08-04-2019 Time: 08:04:46:am

A former Minister of Finance, Mr Seth Terkper, has advised the government against implementing policies that are popular with the electorate but have the tendency to hurt the economy in the long run.

He cited the reduction in the benchmark values for imports as one such policy that could deepen the perennial fall in domestic revenue and lure the government into accumulating more debts in order to meet rising expenditure needs.

In an interview last Saturday, Mr Terkper said the introduction of the policy at a time revenues had suffered consistent falls since 2016 “begs the question if there has been any thorough discussions on it”.

With the benchmark valuation being the cedi value upon which import duties are calculated, he said reducing those values by 30 per cent for vehicles and 50 per cent for other imports “can lead to an immediate drop in revenue”.

“Before you get to the medium term, when you hope to become competitive with the ports to be able to attract the volumes, we must be ready to face the fact that a reduction of 30 to 50 per cent in benchmark values will affect the tariff base collected by the Customs Division of the Ghana Revenue Authority,” he explained.

Customs’ collections

In 2017, the Customs Division missed its target by 8.63 per cent.

The Commissioner General of the GRA, Mr Emmanuel Kofi Nti, said that year customs collected GH¢12.7 billion, against a target of GH¢13.9 billion.

The shortfall increased to 18.6 per cent last year, with actual collections in 2018 being GH¢13.19 billion, compared with a target of GH¢16.21 billion, Mr Nti said in January this year.

Mr Terkper, who is a tax expert, explained that beyond affecting the base upon which import tariffs were calculated, the reduction in the benchmark values could also affect collections from excise duties, thereby deepening the implications of the policy on total revenue collections.

“If you change the base of computation, you are changing not just tariffs, which are the core Customs duties, but you are likely to change it for excise too.

“This is because there is some excise tax on imported vehicles and so that is going to be affected. Also, are you going to change for value-added tax (VAT)?” he asked.

Those ripple effects, he said, could lead to “a huge revenue loss at a time the GRA is already struggling to meet its revenue targets”.

On an annual basis, domestic revenue collected by the GRA has turned up lower than budgeted since 2016.

Consolidated Fund

Mr Terkper also questioned the legality of the benchmark values, explaining that their continued existence meant that the country was superimposing the benchmark values, previously called commissioner’s values, on invoice values.

He recalled that following the introduction of the Single Window system at the ports, the country started moving towards the World Customs Organisation base, which was invoice base, with strong customs database for prices and classifications.

He said the reduction in some fees charged at the ports could also affect revenue inflows into the Consolidated Fund.

“Part of those fees are also internally generated funds (IGFs) for some of the agencies that have been named. So my worry now is that those that go into the Consolidated Fund will affect budget revenue and the portion that goes to the agencies will affect their IGFs.

“The question, then, is: what is the proposal to replace all these likely revenue losses at a time when Customs is already struggling?” he asked.

He asked traders to be moderate in their jubilation because of the reduction, saying that similar reductions in the past turned out to be short-lived.

He cited the announcement of the recalibration of the Value Added Tax (VAT) rate, which was initially misinterpreted as a reduction; the reduction in taxes on spare parts, which turned out not to be true, and the continued existence of taxes that were originally meant to be terminated by 2018 as examples.