The Ashanti, Ahafo, Bono and Bono East Regional Chairman for the Association of Ghana Industries (AGI), Kwasi Nyamekye, has lamented that industries are struggling to stay afloat due to excessive taxes.
He said the tax burden on manufacturers has now reached unsustainable levels as government continues to introduce tax measures in a bid to meet conditions for the US$3billion International Monetary Fund bailout programme.
Government, after seeking financial assistance from the International Monetary Fund (IMF), has had to raise internal funds as part of prior conditions for the three-year programme. This, Mr. Nyamekye says, has brought an increased tax burden on industry – especially the removal of incentives on importation of raw materials and introduction of new taxes like the amended Excise Duty and Growth and Sustainability Levy, among others.
According to Mr. Nyamekye, these taxes are hindering growth and development of enterprises in the country. Therefore, it has become necessary that steps be taken to remove them. He warned that failure to remove some of these taxes could lead to the collapse of many businesses and loss of jobs.
More importantly, he said, the current tax regime needs a complete overhaul if local businesses are to be competitive within the African Continental Free Trade Area.
“One of the key challenges confronting businesses in Ghana now is the excessive taxes and high tax rates including VAT. These rates place an enormous burden on companies, particularly small and medium enterprises (SMEs) which form the bedrock for growth of Ghana’s economy. This, we see, will undermine government’s efforts at raising the targetted amount of taxes to undertake infrastructural development and spur growth of the economy.
“The complexity of the tax system in Ghana is another significant concern. The intricacies of tax regulations, coupled with frequent changes in policies, pose a significant challenge to businesses,” he fumed.
Although he admitted that taxes play a vital role in every nation’s development, Mr. Nyamekye said it is about time a fine balance is struck between generating revenue for the country and ensuring the prosperity of businesses – which are the economy’s backbone.
He explained that when businesses flourish, it directly translates into more revenue for the state and jobs for more people.
“It is an undeniable fact that taxes play a vital role in funding government initiatives, public services and the overall development of a nation. However, it is crucial to strike a balance between generating revenue for the state and ensuring the prosperity of businesses, which are the economy’s backbone. Unfortunately, the current tax policies have created an unfavourable business climate for industry,” Mr. Nyamekye emphasised.
Mr. Nyamekye spoke during the first and second quarter General Meeting for AGI members of the Ashanti and Bono Regions in Kumasi. The event was themed l: IMF conditions and its effects on industries.
To help alleviate the plight of producers, the AGI Chairman spelled out some measures that government can put in place.
“Government can reduce overall import charges on the importation of raw materials for manufacturing; implement progressive and fair tax rates that encourage growth and investment; and simplify the tax system while providing clearer guidelines to ensure transparency and ease of compliance for businesses – especially SMEs. Additionally, government must encourage sector-specific tax incentives to promote investment and growth in key industries such as manufacturing, agriculture and technology. Finally, there should be a fair and non-discriminating VAT regime,” he highlighted.
Mr. Nyamekye further urged government to have regular consultations – that is, engage with business owners and industry associations to gain a better understanding of their challenges and incorporate their feedback into tax policy decisions.