Mr Adomako Osei-Frimpong, the Senior Economist for Strategy and Research at GCB Capital ltd, shared his views on the impact of tax policies outlined in the 2023 budget.
Mr Adomako Osei-Frimpong, during a forum on the GCB Capital Take for 2023 Budget deliberated on key topical issues relating to the tax proposals made by the government and how individuals as well as business tends to be affected by these policies.
Mr. Osei-Frimpong disclosed that, even though government is in the right direction by implementing various tax policy measures to raise more revenue in undertaking its projects, it tends to affect the income of employees.
The introduction of the additional payee bank of 35% may help government in attaining its revenue as projected, however, this will have an impact on the disposable income of employees and the cascading effect on their spending capacity, including support for their dependables, he added.
According to him, despite the fact that introduction of the 2.5% VAT will ensure effective VAT rate moving from 19.25% to 21.75%, It will lead to an increase in cost of production and operations of business entities, resulting in a high cost of goods and services for the final consumers.
“The ultimate goal of businesses will be to transfer the high cost of production to the final consumer who purchase their goods and services. In these difficult times, increasing VAT will worsen the plight of tax payers who purchase goods and services as they are usually the final consumers, leaving them with little disposable income.
“This will also have an impact on the rate of inflation as the average price of goods and services will go high.”
Mr Adomako Osei-Frimpong
SMEs Must Leverage Opportunities Provided By AfCFTA.
Mr Adomako Osei-Frimpong admonished government’s effort to take advantage of the AfCFTA. Participating fully into the AfCFTA initiative will provide opportunities for Ghanaian businesses to access new markets and generate foreign exchange to shore up Ghana’s balance of payments position, he said.
According to him, this was an opportunity to enhance the growth of Small Medium Enterprises (SMEs) and create opportunities for these enterprises to play a vital role within the African context.
Mr Osei-Frimpong revealed that, the withdrawal of benchmark values tends to have both positive and negative impact on the economy.
“While the withdrawal of the benchmark values would make import expensive and thus increasing prices of goods and services on the local market, hence leading to inflation, it is also expected that, withdrawal of the policy would boost local production to support local industries,” he said.
Mr. Osei-Frimpong expressed that, regardless government’s effort in raising revenue, conversion of the National Fiscal Stabilization Levy (NFSL) to Growth and Sustainability Levy (GLS) with the aim of increasing effective corporate tax, was not implemented at the appropriate time.
“It is evident that, the conversion of the National Fiscal Stabilization Levy (NFSL) to Growth and Sustainability Levy (GLS) to cover all entities, would increase effective corporate tax rate from about 27% to 36%. Does this make Ghana Competitive in sub-region and what would be a signal to the investment community?
“Even though government is in the right direction for raising revenue, is it the right time to implement this policy? Despite the aim of being competitive to attract foreign investors in your economy, it will also have side impact on the economy compared to our peers within the African context.”
Mr Adomako Osei-Frimpong
In concluding, Mr Adomako Osei-Frimpong urged SMEs and business entities in the area of Agribusiness, Pharmaceutical Manufacturing, Tourism, Textiles & Garments to leverage low-cost financing options provided by the Development Bank Ghana (DBG).
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