The Association of Ghana Industries (AGI) has made some key policy change demands on government, ahead of the 2019 mid-year budget review, scheduled for today.
In statement signed by the President of AGI, Dr. Yaw Adu Gyamfi, the Association highlights the need for government’s attention to some keys areas in order to create a competitive business climate for Ghanaian companies both locally and internationally.
These areas of attention include the recent reduction in benchmark values, the straight levy regime introduced in the 2018 mid year review, luxury vehicle tax, the African Continental Free Trade Area (AfCFTA) arrangement, the fumigation levy, implementation of government’s industrial initiatives, Excise Duty Rate on Bottled Water, the depreciation of the local currency, as well as the high cost of electricity, and passage of the Fiscal Responsibility Act.
Competitiveness of local industry remains key and the removal of barriers to competitiveness will be crucial for bolstering growth for the real sector and job creation prospects.
On the area of the reduction of benchmark values, the Association noted that the current regime of the wholesale reduction of benchmark values for all imports has become problematic to industries operating in the country.
Effective, April 4, 2019, there was a reduction in benchmark value of import duties at all of the country’s ports, where benchmark values of imports were slashed by 50 per cent while those for vehicles were reduced by 30 percent.
Some of the imports to Ghana already enjoy significant export rebates from their countries of origin, thereby discouraging local investment in the affected sectors.
Straight levy regime
The straight levy regime, which was introduced in the last mid year review, has become a disincentive to local manufacturing, the association indicated.
Before the straight levy came into force, manufacturers recovered 17.5 percent input and 17.5 percent output Standard Rate VAT fully.
However, under this regime, manufacturers can only claim 12.5 percent, leaving five percent as cost burden, likely to be passed on to consumers. The three percent VAT Flat Rate scheme (VFRS) operators (retailers/traders) have been exempted from the five percent tax burden under the new regime.
In view of the burden of this regime, the Association is urging government to re-consider the negative impact of the levy on local manufacturing.
Luxury Vehicle Tax
AGI urges government on the need to quickly review the luxury vehicle levy imposed on vehicles with high engine capacity of 2950cc and more.
This has become necessary since a number of companies which have fleets of such vehicles, not luxury, registered in the company name and used mainly for distribution of their products/brands, are being affected by this policy.
This policy classifying such vehicles as luxury is misleading and must be either scrapped or reviewed.
With the African Continental Free Trade Area (AfCFTA) agreement coming into force, Industry is calling on government as a matter of urgency to help develop local production capacity through incentivizing Industry.
Imported goods coming through the ports come with fumigation certificate, wherever applicable on such assets. In view of this, the Association indicates that the levy being charged only duplicates the fumigation exercise, which is counterproductive and therefore brings extra cost to businesses at the port.
Implementation of Government Industrial Initiatives
The Association raises concern about the delays in the release of funds to support the private sector in implementing the government’s industrial initiatives. Therefore, AGI calls on government to speed up the process to achieve the objectives of the industrial programmes.
Excise Duty Rate on Bottled Water
AGI holds the view that the high excise duty regime on bottled water, a basic necessity in Ghana, is a major challenge.
Ghana’s excise rate of 17.5 percent on bottled water is currently significantly higher than the ECOWAS recommended limit of 10 percent for non-alcoholic beverages which exempts water.
AGI points to the need change the structure of the country’s economy towards export market development to reduce the persistent pressure on the cedi.
High Cost of Electricity
Regardless of the 25 percent reduction in tariffs last year, cost of electricity remains high for industry against what other industries in neighbouring countries incur.
AGI believe that by reversing the practice where Industry subsidizes residential consumers, cost to industry will further be driven down.
Fiscal Responsibility Act
AGI expect that the tenets of the Fiscal Responsibility Act will be strictly adhered to, to maintain macro-economic stability in both the short and long terms.