Policy advisor justifies tax reforms as businesses express worry
The Special Advisor to the Minister of Finance, Dr Edward Larbi-Siaw, has justified the recent tax reforms in the country, saying they are meant for lowering the tax rates while bringing in more taxpayers.
Advertisement
Dr Larbi-Siaw, who apologised for the extension of withdrawal deadline for the National Fiscal Stabilisation Levy (NFSL) to 2017, said the country’s ability to achieve a lower tax regime would depend on the general public’s compliance level to bring in more revenues.
“As a country, we have worked to reduce our tax rates over the years. The last stage is to move towards every Ghanaian filing tax returns,” he told a Business Forum on the "National Fiscal Stabilisation Levy and the Stamp Tax Policy organised by the Ghanaian-German Economic Association (GGEA).
The forum is a follow up on an earlier one in January aimed at examining the general tax policy environment in the country, which the private sector and individual workers had complained was hurting incomes and stifling the business environment.
But business representatives at the forum expressed worry about the rising cost of doing business in the country due to the myriad of tax policies, as well as hikes in utilities and called on the tax authorities to improve their systems, putting customer service at the front burner to ensure easy compliance by taxpayers.
Dr Larbi-Siaw and another speaker, Mr Kofi Frempong-Kore, a Partner-Tax at KPMG, traced the history of the current National Fiscal Stabilisation Levy (NFSL) and emphasised how they went to augment the government’s revenue shortfalls.
The levy started in the 1960s until 2013, but comes with different names, with the last two versions being the National Reconstruction Levy and the National Stabilisation Levy.
Tax stamp for excise goods
When it came to the Tax Stamp which implementation date had been postponed twice already, the tax policy advisor said it would be charged on excisable goods and required that importers of excise goods affix the stamps on all items.
Other Trending Stories
He explained that importers could be allowed to move their goods to customs bonded warehouses where the embossments would be done, or there was an option to purchase the tax stamps and send them to the manufacturer to emboss them before the goods arrive.
There were also assembly lines or hand-held machines which could all be deployed by the importers to affix the tax stamps, the tax policy advisor said, stressing that the government was ready to listen to suggestions from importers on ways to make the system better, although the implementation remained certain.
Performance of the levy
Mr Frempong-Kore said the NFSL was recently introduced in 2010 to collect GH¢101.13 million, 188 per cent above the target, with the 2011 collections also exceeding target by 84 per cent.
However, when it was reintroduced in 2013, the tax underperformed its target by a negative 23 per cent at GH¢193.49 million in 2014 with last year’s figure of GH¢217.28 million representing an underperformance of 12 per cent, mainly due to the slow economic activity.
The figures realised were about 1.1 per cent and 0.72 per cent of the total domestic tax revenue for 2014 and 2015 respectively.
This indicated that the tax was directly correlated with the economic conditions on the ground.
“The collections have largely followed the performance of the economy. In 2010, the significant increase in collection compared to the budget was as a result of an average economic growth of 7.7 per cent which was largely influenced by the service sector,” Mr Frempong-Kore stated.
He said while the levy gave the government room to reduce the fiscal gap, it also impacted negatively on businesses, since they were not allowed to deduct them before paying their corporate taxes.
The tax partner, therefore, urged the government to work towards creating a friendly environment for businesses to thrive so that more taxes could be collected to support government fiscal position.
President of GGEA
The President of the GGEA, Mr Stephen Antwi, said while the government would be receiving higher revenues from hikes and more taxes recently introduced, it was a matter of time for the real impact to be felt. That would include losing some businesses to neighbouring countries.
“The worse is that because of the cost factors, in-land manufacturing is suffering, as people now find it easier to import and pay duties on even items that we could produce locally such as fruit juices. Eventually, these companies will locate in neighbouring countries and export here,” Mr Antwi stated.
He called on the government to conduct a holistic review of the cost build up factors in the country and discriminate in the implementation so as to protect key areas, saying “we cannot have a blanket approach.”
Advertisement