Industry players express concern over tax increase
Some industry players have raised concerns over the upward adjustment in some taxes in the mid-year budget review, stressing that the increment will impact negatively on the cost of living.
The industry players are the Ghana Telecommunications Chamber (GTC), the Ghana Union of Traders Associations (GUTA), the Consumer Protection Agency (CPA) and the Institute of Chartered Economists of Ghana (ICEG).
The Minister of Finance, Mr Ken Ofori-Atta, presented the 2019 mid-year budget review to Parliament last Monday, at which he proposed that the tax on luxury vehicles be waived, while the Energy Sector Levy (ESLA) and the Communications Service Tax (CST) be increased.
The government proposes to increase the Energy Sector Levy by 20 pesewas per litre for petrol and diesel and eight pesewas per kilogramme for Liquefied Petroleum Gas (LPG) so as to increase the inflows to enable the government to issue additional bonds to pay down our energy sector debt obligations,” Mr Ofori-Atta had indicated.
He also proposed that the CST should be increased from six to nine per cent.
However, in separate interviews with the Daily Graphic yesterday, the industry executives said the increment in the taxes was not the ideal thing to do.
The Chief Executive Officer (CEO) of the GTC, Mr Kenneth Ashigbey, expressed reservations about the increment in the CST without consultation with players in the industry.
“What usually happens is that when budgets are about to be presented or reviewed, the government engages stakeholders through what is called the tax dialogue. But this time, there was no engagement and so the increment came as a surprise to all of us.
“We know that the government needs revenue to meet its objectives, but if we had been engaged, we would have advised against increasing the CST because it is a consumer tax that affects everyone,” he said.
Additionally, he said, the increment in the CST had the potential to affect the government’s digitisation agenda.
“The government is trying to push through the digitisation agenda for inclusion, but high CST could get people out of the bracket. Also, increasing the tax does not also send the right signals to investors,” he said.
Mr Ashigbey added that the Telecoms Chamber would explore avenues to engage the government on the issue, especially because the measure had the potential to affect efforts at bridging the digital divide.
The CEO of the CPA, Mr Kofi Kapito, said although the government deserved commendation for waiving the luxury vehicle tax, the increase in the ESLA would lead to increases in the prices of petroleum products.
That, coupled with the increase in the CST, he pointed out, would make life unbearable for citizens.
“The luxury tax was a burden on consumers and we can say that the government has done well by listening to the public outcry as it was unnecessary and should not have been introduced in the first place.
“We expected that the mid-year budget would cushion consumers; but these taxes will burden the citizens,” he said.
He called on the government to take a second look at the CST hike because it would defeat the country’s digitisation agenda.
“It is surprising that a government that seeks to bridge the digital gap is charging people more for talking. This is not good; so let us look at how to make data and the Internet more accessible,” he stressed.
He also commented on the government’s decision to review the “take-or-pay” petroleum purchase agreements, which he said was a good decision, since those agreements were a financial burden on the country.
The Take-or-pay agreements bind the government to pay for the cost of power generated by independent power producers (IPPs) at agreed levels or at their full installed capacities, even if the country does not utilise all that has been generated.
However, he said, it was unimaginable for the government to seek a review of those agreements and increase levies in the energy sector simultaneously.
Mr Kapito also said it was worrying that the 2019 budget review did not show any sign that the government was ready to cut down on its expenditure, especially on the Executive arm.
He stressed the need to streamline government expenditure on luxury cars and other wasteful expenditure.
For his part, the CEO of the ICEG, Mr Gideon Amissah, also deplored the upward adjustment in the CST in particular, saying it would reduce the disposable incomes of families and consumers and lead to a high cost of living.
“Unlike the luxury vehicles tax that targeted a particular class of people, the CST is no respecter of people’s levels of income. We are all bound to bear the challenges that come also with the increment in the ESLA too and this is very problematic,” he said.
Mr Amissah said the expectations of the ICEG on innovative ways of raking in tax revenue without burdening the lower class in particular had not been met.
“We expected a policy that targets the internally generated revenue of state-owned enterprises (SOEs) and timely payment of dividends, so that the government will concentrate on non-tax revenue. We have to explore other revenue sources,” he said.
He said it was also worrying that the government failed to outline clear policies that would help generate more revenue from the ports.
The General Secretary of the Greater Accra branch of GUTA, Mr Emmanuel Nana Poku Acheampong, said the association was disappointed at the increment in the ESLA and other taxes.
“The increment in petroleum taxes was not well thought through, with the public and businesses in mind, because this increment will affect the prices of all commodities.
“Imports, food, public transport and everything will be affected. The government could have waived some of these taxes and broadened the tax net,” he added.
Mr Acheampong called for an immediate halt to the increment of taxes at the ports, stressing that GUTA would resist those increments.
“The government should quickly halt the increment of any levy at the port, be it by the Ghana Ports and Harbours Authority or Meridian Port Services, because traders will never pay it. It is about time the government listened to traders,” he stressed.