Chief Executive Officer of the Association of Ghana Industries (AGI), Seth Akwaboah, has expressed the need for government to improve domestic production in the country.
According to him, the association appreciates the effort to bring stability in the country, as it has several times prior to the budget reading indicated that a major desire was to see signs and indicators of stability. Nonetheless, he stated that concentration on domestic production is what the country needs to grow the economy.
“So, we see that effort but while doing so, we also appreciate one key thing that now, everybody is talking about and that is the need to concentrate on domestic production, improve industrialization to reduce importation. I think the recent experience we’ve had is that during the COVID period and even now is the depreciation of the cedi [which] a clear part of the reason is over-excessive importation that is bedeviling us. So, interventions have been made in the budget that efforts will be made to concentrate on local production. So, all those efforts are very important, and it all depends on how it’s well implemented.”
Seth Akwaboah
Mr Akwaboah commended government on its effort to pursue IMF intervention and the requirements that goes with it. He noted that the key effort is to generate more revenue domestically and shore up revenue levels to be able to meet expenditure, otherwise IMF intervention may even be difficult to execute.
“For us in our situation, we are ready to work with government and ensure we have effective implementation of some of these policies to improve the production sector.”
Seth Akwaboah
Impact of VAT increment on manufacturers
Commenting on the increment of VAT by 2.5%, Mr Akwaboah expressed his disappointed. He highlighted that the move by government will not augur well for domestic businesses.
“I think when it comes to some of the taxes, we have a challenge with it. For example, the VAT being increased to 2.5%, whiles maintaining the recent VAT. We recall that when it was 17.5%, it was clearly input-output tax, so you’ll recover all the VAT that you pay to government through your sale. Then last year, there was an imposition of a levy. In fact, last year it was 5% [and] it was increased to 6%. So, this 6% cannot be recovered, it meant that when you pay 18.5% to government, you can only recover twelve and half percent. That additional levy didn’t help manufacturers.”
Seth Akwaboah
The AGI CEO stated that a review of tax handles such as VAT was one of the expectations of members. He indicated that the increment of VAT “without necessarily changing the VAT within” means that there is an additional levy which implies more VAT payment by local industries.
“… That levy part is also tax on tax, so when you calculate it, in actual fact, it becomes about 21.5% and we think this is on a higher side and it doesn’t support manufacturers. Bear in mind that most of the well-organized manufacturing companies and industrial companies are on this VAT regime, a lot of the traders who buy and sell, who import are actually on the flat [rate].”
Seth Akwaboah
Mr Akwaboah revealed that the imposition of VAT rate increment without necessarily increasing the flat rate rather reduces tax for importers which goes against local manufacturers.
“So, I think we have to look at it critically, especially with talk of trying to improve local production, supporting looking manufacturers, making them more competitive. We shouldn’t have a tax regime that runs counter to whatever your objectives are.”
Seth Akwaboah
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