Business groups have signaled strong intentions to cut jobs, shut down some production lines and increase prices, all in response to the passage of three revenue bills that they had vehemently opposed.
The Association of Ghana industries (AGI), the Ghana National Chamber of Commerce and Industry (GNCCI) and the Ghana Union of Traders Association (GUTA) said the measures were needed to keep their operations afloat while they waited for the much-touted relief that a bailout from the International Monetary Fund (IMF) was envisaged to bring.
Parliament last Friday passed the Income Tax Amendment Bill, the Excise Duty Amendment Bill and the Growth and Sustainability Amendment Bill meant to fetch the government some GH¢4 billion as part of measures to shore up domestic revenue and also fulfill some preconditions to enable it to access US$3 billion in balance of payment support from the IMF.
While the various business groups admitted to the intent of the government for introducing the new revenue measures, they, however, described the move as anti-business and consequently signaled to the public to brace themselves for the worst as businesses positioned themselves to mitigate the impact of the development on their existence.
Interviews
In separate interviews with the Graphic Business, the President of the AGI, Dr Humphrey Ayim-Darke, and the President of GUTA, Joseph Obeng, said their members would now have to resize their operations, including laying off workers, closing down some lines and raising prices while they waited for the economic stability that the IMF deal promised.
“This is an anti-industry move, but we will not allow our businesses to die and so we will find a way around it. We will cut down on staff, and instead of doing more production, we will also import,” Dr Ayim-Darke said when asked how his outfit would live through the taxes.
“Generally, this is unfair; it will make the business environment very hostile, but we cannot fight the government,” he added.
The two said businesses must survive to be salvaged.
“Besides, in the past years when we gave them those levies and other interventions, they had not demonstrated to us that they could use them to restore macroeconomic stability,” the AGI President said.
The COVID-19 Recovery Levy, the Electronic Transfer Levy and the Sanitation Levy were implemented after the COVID-19 rage as fallback mechanisms to salvage the economy.
Nuisance taxes
Mr Obeng described the new taxes as nuisance and obnoxious to the business community.
He said it was sad that a government that had scrapped taxes in 2017 to enable business to flourish was imposing worse ones on companies at a time when they were struggling to get back on their feet.
He said the amendment to the Excise Duty Law, which now increases excise on fruit juices by 20 per cent, was also a slap in the face of the country’s push to trade internationally.
“We are already uncompetitive in the scheme of affairs of the African Continental Free Trade Area (AfCFTA) and the cross-border trading that we do in the West African sub-region and that is why you see people import goods from Togo, instead of buying them here,” he said.
He said Ghana was unable to export a sizeable quantity of goods under the AfCFTA, a regional trade pack that allows the free export of stated goods, since it took effect in January 2021.
Petroleum Chamber
In an earlier statement, the Ghana Upstream Petroleum Chamber (GUPC) described the new laws as anti-business that risked collapsing indigenous oil service companies.
It said the taxes could also trigger disinvestment by international oil companies.
After a late-night drama on Friday, the new act was passed by Parliament as one of two revenue acts presented by government and the other is an amended Excise Duty Act, which is meant to further impose excise duty on cigarettes, tobacco and some sweetened products.
The mining and upstream oil and gas companies will pay an additional tax of one per cent on their profits before tax, as stipulated by The Growth and Sustainability Act.
The GUPC, representing all the oil and gas companies, objected to the introduction of the Growth and Sustainability Bill which seeks to impose a one per cent tax on gross production for oil and gas companies.
Implications
“Introducing additional taxes at a time when the industry is going through challenging times is rather unfortunate, anti-business and risks the collapse of indigenous oil service companies, as well as triggering disinvestment by international oil companies,” the chamber said, adding: “There is also a five per cent tax on profit before tax that applies to the oil and gas service companies, meaning taxes will be imposed, irrespective of the financial performance of the target business.”
It said the industry considered the levy as the latest in a series of creeping taxation that was affecting the economic balance of petroleum agreements.
The creeping taxation, it said, included the COVID-19 Recovery Levy, the Ghana Education Trust Fund Levy, the National Health Insurance Levy, the one per cent Local Content Fund Levy and several others.
The chamber noted that the provision for a one per cent tax on gross production for oil and gas companies represented an increase in royalty to all intents and purposes.
Analysts in the upstream petroleum sector said the growth and sustainability tax would damage investments and described it as an imposition that would inhibit further growth of service companies.
They said when creeping taxes and levies became the norm, tax avoidance and disinvestment became inevitable.
Chamber of Commerce
The GNCCI, for its part, said the new taxes would further worsen the plight of businesses.
“The taxes, as matter of fact, will make businesses less competitive, compared to businesses in other countries where taxes are lower.
“This can discourage foreign investment and make it difficult for local businesses to compete with foreign businesses,” the Executive Secretary of the GNCCI, Mark Aboagye, said.
He said given the harsh business environment, businesses in Ghana would have no choice but to close-down or relocate to other countries.
They could also be forced to pass on the cost to consumers, Mr Aboagye said.
“The government should rather focus on tax efficiency and tax compliance to increase tax revenues, instead of introducing new taxes,” he added.