Government must be ready to make sacrifices - PEF

The Private Enterprise Foundation (PEF) says government must be ready to make serious trade-offs this year between the short-run revenue gains it could derive from the imposition of certain taxes on local companies and the long-run benefits such companies could make to the economy.

It said it is important for government to review all such taxes which are injurious to the operations of local manufacturing businesses to enable them to become profitable and contribute to the country's economic development drive as well as create employment in the long-run.

In an interview with the Ghana News Agency (GNA) Business Desk in Accra, PEF said the imposition of certain types of taxes has had a debilitating effect on the operations and viability of companies and also contributed to loss of market and income for the companies.

It cited the high excise and import duties on raw materials and finished goods as examples of some of the hazards that industry has to go through to make it.

PEF said apart from encouraging smuggling, the imposition of high excise tax rates relative to those applicable in neighboring countries in the sub-region adversely affect government revenue and lead to shrunken markets and loss of income to enterprises.

A Position Paper by PEF the economic outlook for 2003 said: "If excise tax rates are too high government loses revenue through increased smuggling and markets for similar goods produced locally shrink and with it the operations of the local producer, employment and incomes."

Ghana currently imposes various excise tax rates, with cigarettes attracting 140 percent and a total tax incidence of 40.9 percent, heightening smuggling of the product from neighbouring Togo, whose excise tax rate is 15 percent with a total tax incidence of 20 percent.

Similar high taxes on beer are also a major source of worry to breweries in the country.

PEF said charging the same rate of import duties on some raw materials and finished goods also clearly puts local industries that use that type of raw material at a disadvantage and presents importers of finished goods distinct benefit.

It, therefore, urged government to ensure that tax on raw materials should be such that it would not place the local producer at a disadvantage vis-?-vis the importer of finished goods.