GUTA rejects “counterproductive” VAT/NHIL hikes

The Ghana Union of Traders’ Associations (GUTA) has called on the government to rescind its decision to increase taxes and levies.

The government has reviewed some taxes upwards with new ones being introduced.

Among the hikes are Value Added Tax (VAT) and National Health Insurance Levy (NHIS), but the traders insist they would be worse off.

In addition, was a proposal for a Sanitation and Pollution Levy (SPL) of 10 pesewas on the price per litre of petrol/diesel under an Energy Sector Recovery Levy of 20 pesewas per litre on petrol/diesel under ESLA.

President of GUTA), Dr Joseph Obeng, acknowledged the need for government to address revenue disruptions brought by the COVID-19 pandemic, but insisted, “The increment in VAT and NHIL is counterproductive”.

He told theghanareport.com that few businesses pay taxes, yet government recycles taxes around a minority without efforts to expand the tax net.

“It is not fair, so if it is increased again, it becomes a disincentive for those who have been captured”.

In the long run, the government may not achieve its objective because “when taxes are increased people will find ways to avoid it”.

Those who have registered for VAT would have their prices higher and will be disadvantaged in the same markets as those unregistered to pay taxes.

Why is the government increasing taxes?

In the 2021 Budget Statement and Economic Policy on Friday, March 12, Caretaker-Finance Minister Osei Kyei-Mensa-Bonsu outlined a number of measures to increase government revenue.

The government is seeking parliamentary approval for GHȻ 111.3 billion as total expenditures while expecting total revenues and grants of GHȻ 72.1 billion for the year.

He told parliament “government is proposing the introduction of a Covid-19 Health Levy of a one percentage point increase in the National Health Insurance Levy and a one percentage point increase in the VAT Flat Rate to support expenditures related to Covid-19”.

Ghana is estimated to have lost GHC13.6 billion in revenues as a result of the COVID-19 pandemic.

The government also announced some rebates to transport operators and the entertainment industry.

But Dr Oteng disagreed with some of the exemptions with the explanation that the government was “discouraging people from paying taxes” when more people are needed to be included in the existing database.

He however suggested that “the petroleum tax is fair because everybody uses petrol/diesel one way or the other”.

Taxes will make Ghanaian businesses non-competitive under AfCFTA

With the introduction of the African Continental Free Trade Area (AfCFTA), countries have opened up to allow free cross country trade.

Dr Oteng was of the view that other countries are cutting taxes to reduce the cost of production hence they were not expecting the government to do the opposite.

“You have to be sensitive to local businessman or we will be irrelevant,” he stressed.

With the proliferation of cheaper foreign goods, GUTA fears Ghanaian businesses will run into losses.

Find ways to shore up revenue

Alternatively, they have suggested other ways by which the government can boost revenue.

One of the suggestions is the scrapping of tax holidays.

The government paid out about GH₵54million as a refund to businesses under the new tax exemption policy as of June 2020.

Dr Oteng insisted, “We have suggested that government can abrogate tax exemption regime”.

He was concerned that “the leakages are too much” with some businesses abusing provisions under the initiative.

He believes some unqualified firms companies are also enjoying lower taxes under the Ghana Free Zones programme.

He was concerned that “huge companies are the beneficiaries” and “just a few of us are paying taxes”.

GUTA wants the government to make efforts to capture all trading activities under existing taxes.

E-commerce overshadowing traditional businesses

Another concern of GUTA was online businesses that are not captured to pay taxes.

“None of them is paying tax. We are in modern society and we need IT solutions to monitor and streamline their activities to get them under the tax net,” he lamented. “That is the trend now and those of us with physical addresses are being surcharged repeatedly”.

One of such innovations is ride-hailing services that do not pay levies and taxes that traditional commercial transport operators are required to pay.

Tackle cost of borrowing

He wants the government to compensate businesses if the taxes are not reversed.

He suggested that the National Development Bank project should be expedited for businesses to have loans at subsidised rates.

For him, the cost of borrowing was exorbitant at almost 30%, higher than their competitors in neighbouring countries.

Additionally, he wants the government to compel commercial banks to slash their interest rates.

“The fact that we are in a liberalised economy does not mean we cannot control the financial sector,” he stated.

He said it not justified for banks to set high-interest rates and proposed a cap.

Furthermore, he wants banks to seize surcharging of companies because others have defaulted payment of their loans.