Despite reassurances by President Nana Akufo-Addo at last Friday’s May Day celebration of his administration’s commitment to protecting businesses and workers , lots of entrepreneurs, corporate executives and workers were disappointed by his failure to commit to new fiscal incentives to encourage enterprises direly affected by COVID 19, to retain their workers. Many executives of corporate Ghana, as well as entrepreneurs, had been expecting an announcement by government that it would offer fiscal incentives – expectedly in the form of tax relief – to enterprises that agreed to call back workers laid off because of the lull in their business activities and consequent revenues. However the President stopped short of this.
Thousands of workers have been laid off over the past month or so as the coronavirus pandemic has lashed business revenues and thus their ability to pay salaries. Some enterprises have responded with deep pay cuts. Some are still planning staff retrenchments despite the lifting of partial lock downs of Accra, Tema, Kumasi and Kasoa, arguing that economic conditions remain un-conducive and there is still no certainty when normalcy will return.
Consequently there had been widespread hopes that government would announce employment levels-related tax relief to persuade enterprises to retain workers through the ongoing crisis. However government, already facing public revenue losses and extraordinary expenditures totalling some GHc9.5 billion this year as a result of the pandemic has shied away from comitting to further tax revenue losses.
Tax relief proponents had argued that pay as you earn taxes paid by retained workers and consumption taxes on the goods and services they would buy with their wages, would compensate government for the cost of business tax relief. However it appears, government’s accountants have done the math and warned that the net revenue losses would be too substantial. Government’s decision was made easier by a curious lack of pressure towards tax relief in order to retain workers, from Trades Unions Congress.
Consequently businesses hard hit by the pandemic will have to look to the Ghc600 million in soft loans, funded by government and set to be disbursed imminently through the National Board for Small Scale Industries, for financial succor with which to retain as many employees as possible for as long as possible. It is still unclear whether disbursements under the initiative have employee retention as a condition for receiving support.
A longer term initiative is the GHc3 billion debt financing initiative announced by government in conjunction with the banking industry for the resuscitation of selected industries such as pharmaceuticals and hospitality. It is anticipated that when this initiative is eventually executed – as yet there are no firm modalities and timelines – the sheer quantum of funding available will result in significant new job creation.