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Businesses want simpler, improved tax regime • KPMG report reveals

By: Emmanuel Bruce
Charles Mensah

Businesses across the country have called for a more simplified and improved tax regime that will stimulate the private sector.

They believe some of the tax policies that have been introduced by the government have increased their cost of doing business, a typical example being the conversion of the 2.5 per cent NHIS levy and the 2.5 per cent GETFund levy into straight levies.

The conversion of these two levies means that businesses will now be unable to apply for a refund of the entire 17.5 per cent input VAT, because per the new regime, they are now limited to only 12.5 per cent.

This was contained in the 2019 KPMG pre-budget survey report.

Shedding more light on the survey on Springboard, Your Virtual University, a radio talk programme on Joy FM, a Partner at KPMG, Mr Andrew Akoto, said the intent of the survey was to support the drafters of the budget in taking into consideration the views of very significant members of the economy who would rely on this budget for their activities.

He said the audit firm reached out to a number of significant players in a variety of sectors which included construction, manufacturing, agriculture, and banking.

“What is noteworthy is that we try to highlight the opportunities and also try to highlight the impact, particularly the fiscal measures that were put in place in the last budget and how it has affected the business community,” he stated.

“We also tried to gauge the expectations going into the next fiscal year and interestingly a keynote from the survey that we did suggests that the tax regime must be simplified and improved,” he explained.

He said the private sector was the engine of growth and for that matter, the government must put in place policies to stimulate that aspect of the economy.

“There have been a lot of complaints in terms of the complexity in the tax laws and some have even suggested that the tax authorities themselves are   inconsistent with the way they apply the tax laws and, therefore,  the budget must improve this,” he noted.

Expanding tax net
On how the government could mobilise enough money to service its debts and other expenditures without increasing the tax rates, he said the government had begun to address this by restructuring the debt portfolio with more affordable debt.
He said there was, however, the need to increase revenue by expanding the tax net.

“The government has begun to formalise the economy through digital systems and this is a step   in the right direction.

Another important step is to ease the pressure on the middle class by taking measures such as raising the threshold on the highest tax budget, among other things,” he said.

Growth areas
On what will be the growth areas in 2019, he said agriculture represented a key growth area.

He said the Planting for Food and Jobs programme had been a success and the introduction of the Ghana Commodity Exchange Market would further boost the programme by providing opportunities to the farming community to trade their goods upstream. 

He also stressed the need for the government to provide a business incubation space that would promote local talent in the development of digital solutions.

Tax exemption regime
Sharing his perspectives on the same programme, the Chief Executive Officer of Trust Consult, Mr Charles Mensah, said scrapping the tax exemption regime because of abuses in the system was not the way to go.

He said the practice where businesses had to pay the duties and apply for a refund later may look good  but posed challenges to businesses.

“When the things arrive, you pay for the duties and seek for a refund. While this may look good at the end, it is costing businesses bacause  some have to borrow to pay for the duties. Some have done their projections without that cost so this is a major challenge for companies which used to enjoy exemptions,” he stated.

“Fair enough, there have been some abuses of the regime but scrapping it because it has been abused is not good,” he added.

Growth in private sector
Mr Mensah also called for a deliberate policy to encourage growth in the private sector, instead of increasing taxes on the existing market base.
He said value chains had to be built in key sectors such as agriculture, to allow for vertical integration.
Within the mining sector, he said there were large deposits of manganese and bauxite in the country and if aluminium processing could be implemented, that represented a good opportunity for the country.
“The growth of the oil and gas industry also represents an opportunity to reduce the cost of energy within the country and promote the manufacturing sector,” he said. — GB