VAT on motor insurance will affect fares if ...
The Ghana Private Road Transport Union (GPRTU) has threatened to adjust transport fares upwards if insurance companies pass on the Value Added Tax (VAT) on non-life insurance to transport operators.
Advertisement
“Transport operators will be forced to adjust the fares accordingly should the premium on motor insurance go up,” the General Secretary of the GPRTU, Mr Steven Okudjeto, warned.
Over the years, insurance companies have been excluded from VAT. However, the new VAT law now requires insurance companies to charge VAT on non-life insurance products, suggesting that the insurance on motor vehicles is likely to go up.
The government in its quest to generate revenue seems to be increasing taxes at all levels.
Some analysts have questioned the manner in which the government is taxing those already in the tax bracket.
They have wondered why the government would not find innovative means to widen the tax bracket to rope in the millions who do not pay taxes but instead, have found ways to rather burden those who already pay transport.
Transport operators will be justified, invariably, for their action because they are already burdened with a lot of hidden costs which goes to affect their profitability.
For instance, due to the weakening cedi against the dollar, commercial vehicle operators are forced to pay more for the spare parts they buy to be able to keep their vehicle in shape.
Other Trending Stories
In many instances, this is not factored into their cost buildup. Their situation has been aggravated by the increase in petroleum products at the pumps every fortnight.
Cost of insurance
Mr Okudjeto told the GRAPHIC BUSINESS that the insurance cost had already gone up by 30 per cent, a situation which was already burdening operators and, therefore, should it go up again, the transport operators would not absorb the cost but adjust the fares accordingly.
He said a lot of cost elements went into the adjustment of fares and, according to him, insurance cost was one of them.
Mr Okudjeto, however, said the union was not aware of any intention of the insurance companies to charge VAT on non-life products.
Cost of spare parts
The issue about spare parts is also said to be eating deep into the revenue of commercial transport operators.
“The rising cost of spare parts is having a serious negative effect on the commercial transport business,” he said.
Unfortunately, he said the GPRTU, despite its status as a private entity, did not have the power to implement their new charges until it was approved by the sector ministry.
He said that was because the GPRTU was a limited liability entity that blended partnership and corporate structures.
The Chairman for the Ghana Road Transport Coordination Council (GRTCC), Mr Ben Peprah Amoabeng, for his part, disclosed that “the GRTCC will cross the bridge when they get there.”
He said if it happened that motor insurance went up, then they would look at adjusting the fares maybe within the first quarter of the year.
New fares
Mr Peprah also disclosed that after a period of deliberation between the GRTCC, GPRTU and the Ministry of Transport, new transport fares had been agreed and would take effect from yesterday January 27, 2014.
He said the fares were increased by 20 per cent.
Advertisement