The Association of Ghana Industries (AGI) has expressed deep disappointment and concern over the recent passage of three revenue bills by the Parliament of Ghana. In a statement issued yesterday, the AGI argued that the Excise Duty, Growth and Sustainability Levy, and Income Amendment Bills would pose dire consequences for the industrial sector, which is already grappling with a challenging business climate.
The AGI’s main contention is that the tax regime in Ghana does not motivate local production and formal business operations. They are particularly aggrieved by the lack of stakeholder consultation on fiscal policies, which they say have negative impacts on businesses. The AGI claims that it had submitted its views on the bills but did not receive the consideration it expected.
The AGI’s concerns are not unfounded. The industrial sector in Ghana has been facing a plethora of challenges in recent times. The AGI notes that inflation is currently at 52%, VAT has shot up to 15%, and water tariffs have increased by about 172% for the beverage sector. Electricity tariffs have also skyrocketed, rising by 29.9% for industry, and policy rates are currently at 29.5%, making the cost of credit exorbitant. Additionally, there has been an increase in Residual Fuel Oil (RFO) prices due to government subsidy withdrawal, an unstable foreign exchange regime, and levies and taxes on imported raw materials totalling about 50%.
The AGI is particularly incensed by the recent electricity tariff hikes, which they say have risen significantly on two occasions, totalling a whopping 56.5%, within a period of less than six months. They argue that the beverage sector cannot absorb a water tariff increment of over 300% in a single tariff review, and now with excise duties slapped on locally produced beverages, they predict a contraction in manufacturing and other related business activities.
Contrary to the government’s ambitious revenue projections, the AGI believes that the new taxes will hinder rather than promote growth in the industrial sector. They warn that businesses may have no option than to cut down on expenditure and production levels to stay within budget, which could lead to a miss in revenue targets for the government. The AGI believes that while the government needs revenue, fiscal prudence is crucial, and this should not be at the expense of growth in the industrial sector.