New Tax Regime Killing Businesses

The Ashanti Business Owners Association (ABOA) has appealed to the government to suspend the implementation of the newly introduced three per cent Valued Added Tax (VAT).

Rather, it said the government should stick to the old 17.5 per cent tax else many businesses would collapse.

The Secretary of ABOA, Mr Mark Osei Boakye, said this at a press briefing in Kumasi last Tuesday that the ‘three per cent ‘was misleading because it rather increased the VAT portfolio to more than 20 per cent.

Currently, the Ghana Revenue Authority (GRA) collects the old 17.5 per cent VAT at the ports and at the manufacturing stage and then goes ahead to charge the new three per cent, making the overhead cost of transacting business very high.

Previously, businessmen struck out the difference between their input and output and the difference was paid to the government as VAT.

But as it stands now, businesses are to add their projected profit to the cost of the item which is already high, plus the three per cent VAT and pass it on to the consumer, Mr Boakye explained.

Disadvantage

Mr Boakye said the practice was putting businesses at a disadvantage because if the chain of distribution was long, by the time the goods got to the final consumer, the price would just be unbearable.

He added that major companies such as UNILEVER, which were exempted from the VAT, could decide to mount warehouses all over the country and deal directly with the consumers, thereby killing the local businesses.

He said the practice had already taken root in the Ashanti Region where consumers preferred goods from companies with their warehouses than dealing with those in the retail markets.

Mr Boakye suggested that the government should increase the VAT rate at the ports and the manufacturing stages so that there would be no point adding another tax at the distribution stage.

He described the basis for the new tax as unrealistic and urged the government to engage ABOA for a practical demonstration of how the system worked and its effects on the economy.

“The current tax regime is simply killing our businesses; and our appeal is for us to have a fruitful discussion with the government to demonstrate the practical understanding of how the system really works,” he said.

Mr Boakye said the new tax regime favoured those who had not registered for VAT because their prices would always be lower.

He expressed the fear that companies might be compelled, under the circumstance, to lay off a number of workers to reduce their overhead cost, which would invariably have a negative effect on the economy.

He said it was important for the government to find a better way of collecting taxes instead of indirectly asking them to do so.

Source: Graphic