Businesses to experience increased cost of production -Economist

Businesses are likely to experience increased costs of production as the IMF conditionalities prohibit tax exemption and phase out tax holidays.

Rev Dr Samuel Worlanyo Mensah, Economist and Executive Director, Centre for Greater Impact Africa, said the $3 billion loan support secured from the International Monetary Fund (IMF) came with conditions, including removal of value-added tax exemptions.

Others were the reformation of corporate income tax by phasing out tax holidays and exemptions, reducing Customs exemptions and
quarterly tariff adjustment, including electricity and water.

Speaking in an interview, Rev Dr Worlanyo Mensah said companies who had been given some number of years to operate without paying taxes could have the exemptions reversed or the duration reduced.

He said such actions would affect the balance sheets of most of the companies that had signed into the exemption agreement.

“The industries should get prepared, especially those enjoying this level of tax exemptions. The moment there’s a review on these taxes, it will definitely increase the cost of production and cost of doing business,” he said.

The Executive Director said most organisations had not prepared for such eventualities and cut down or downsize their labour force whilst some reduce their workers’ remuneration.

“Laying workers off will affect livelihoods. It is going to affect the cost of living and reduce the standard of living. It is going to be a tough time for individuals and the State,” he said.

Rev Dr Worlanyo Mensah said the removal of the exemption, together with a reformation of corporate income tax, would affect the unit cost of products. Thus, consumers would see an increment in the prices of goods.

He said the Government, in reforming the corporate income tax, would review withholding tax upwards, and once the government did that, it would reduce the operational capital of organisations and by far affect productivity.

“Exemptions on certain goods that we import like the toiletries, sanitary pads are likely to be taken off, and the implication are that we are likely to pay more for such products on the market,” the Economist said.

He said Government might include some more commodities, especially those that had a comparative advantage if produced in Ghana to protect infant industries and the market.