Business News of 2014-02-08

AGI seeks consultation on 2.5 percent VAT rate

The Association of Ghana Industries (AGI) says the implementation of the 2.5 percent Value Added Tax (VAT) without broad consultation with industry was creating genuine difficulties for businesses, especially those in the banking, insurance and pharmaceutical sectors.

The Association is therefore urging government to put on hold the application of the 2.5 percent additional VAT to allow for further consultation and consensus on its implementation.

Dr Yaw Adu Gyamfi, Vice President AGI, said further consultation with industry was necessary to ensure the resolution of any challenges with the implementation of the tax. The increase in the VAT took effect from January 8.

In the 2014 budget, government said proceeds from the increment would be channeled into the infrastructure fund which would take off in the first quarter of the year.

Dr Edward Larbi-Siaw, Tax Policy Advisor at the Ministry of Finance, said the increase in the rate of VAT was not to raise taxes but to correct the imbalance and reduce the deficit.

On the banking sector, he said the new VAT rate would not apply to core banking activities but only non-core activities such as legal, accounting, consulting, debt collection and other such services would attract the new VAT rate. In effect normal services of the bank will not be affected, he said.

On the pharmaceuticals, Dr Larbi-Siaw said the intention was not to make it burdensome for Ghanaians to buy medicines and agreed to further discussions to resolve any challenges that the sector is facing in implementing the new rate.