President of the Ghana Union of Traders Association (GUTA), Dr Joseph Obeng, has called on government to articulate a policy direction to stabilize the exchange rate, depreciation and reduce the monetary policy rate in its budget statement.
According to him, businesses in the country are struggling to open shops and there is much needed respite for the trading community. He indicated that as it stands now, businesses do not have requisite funding to operate.
“Generally, the three pillars upon which businesses thrive have all broken down; these are the inflation, exchange rate and interest rates… So, we are expecting that government or the finance minister articulates a policy direction to stabilize the exchange rate, depreciation and also reduce the monetary policy rate.”
Dr Joseph Obeng
Dr Obeng revealed that to make the business climate more conducive, government must first bring down inflation. He stated inflation is as a result of accumulation of cost and nothing else. As such, businesses expect the finance minister to articulate “clear policies and then timelines” to deal with these issues.
“It’s because we pay more duties and the exchange rate has also made it expensive for our products to go high and the VAT that was 3%, that went up to 19.25%, all these factors including the increase in lending rate to about 40%. The accumulation of these have made the prices of goods soar up in the market, making it unbearable for the trading community.”
Dr Joseph Obeng
Implications of VAT increment on businesses
Commenting on a possible VAT increment by goverment, Dr Obeng revealed that the trading community is not expecting another “layer on cost of doing business”, as it will not be fair. He explained that businesses are already overburdened to the extent that if government introduces another tax or increases existing ones, it’s going to break the backs of these businesses.
“Already, we have said that there is lack of uniformity in the VAT system. The VAT as it’s structured now, does not bring fairness or parity, and that we seek uniformity in the tax administration…”
Dr Joseph Obeng
The GUTA President noted that when “taxes are overtaxed”, compliances is very low, however when taxes are affordable, compliance is very high, and the latter should be the target of government.
“If you want to maximize your revenue collection, what you have to do is to make it affordable and simplified. That’s what effective tax administration is and not to go on compiling and making it extremely difficult for people to pay. What government can do if they want money, is to plug out the leakages and we have so many areas like the free zones, which is being abused, like the warehousing system [and] the tax exemption policy which is being abused. All these areas are the areas that the people who are there are the people who are capable of paying taxes…”
Dr Joseph Obeng
Dr Obeng emphasized that taxes should not be “recycled around just a few” people and needs to be expanded. With this, he urged government to expand the tax net and make it affordable for everybody to pay.
“Around 6 million people are paying for about 30 million people. Effectively, around 1.2 million people are effectively paying taxes and that is not fair for us.”
Dr Joseph Obeng
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