A senior economics lecturer of the University of Ghana, Legon has advocated for the abolishing of the special tax imposed on some imported items.
According to Dr Fritz Gockel, the special tax. which was imposed last year has not achieved its purpose. He argued that the policy rather hurts consumers by increasing prices of the affected imported items and it has also increased indirect taxes to the government.
I find it difficult to understand why the above argument is being used as the reason to call for the special tax to be abolished. Perhaps because I am not an economist, but it does not quite make economic sense to me. Just take a look at the items attracting the special tax - poultry products, milk, human hair, potatoes, grapes, apples, flour, edible oil, cocoa beverages, chocolates and biscuits.
Others are potato chips. peanuts. fruit juice, soups and broth, ice cream, mineral water, beer, paint, gas cylinders, toilet paper and soap.
Among the items listed, the only ones that cannot be produced in this country are flour, grapes, apples, potatoes and white women's hair
In any case there are perfect local substitutes for these items like mangoes, oranges, yam, cocoyam, and the beautiful hair of our own women.
LUXURY GOODS
Because Ghanaians can do without most of these items and be no worse off, it is correct to class them as luxury goods. Dr. Gockel's argument that tax on these luxury goods is hurting consumers is difficult to understand.
Which consumers is he referring to? Is it those driving in air-conditioned luxury vehicles, who stop at traffic lights and roll down their car windows to buy apples? Or is he rather referring to those who pop into Koala supermarket after a meal in Dynasty restaurant just to buy after meal snacks and treats like imported chocolates, potato chips and peanuts?
Come again Dr. Gockels. Are you seriously saying that it is wrong for the government to raise revenue from the consumption of luxury goods so that the money could be used for important sectors like health and education, when even essentials like petrol is heavily taxed in most countries? The tax on petrol in Britain is more than 65% of the pump price
VOLUNTARY DECISION
As an economist, I am sure Dr. Gockels will agree with me that an indirect tax is only paid by those who make the conscious and voluntary decision to buy the goods attracting such tax. The argument that the special tax on these items hurt consumers, is therefore, false since the vast majority of Ghanaians have no need for the items listed above or they could make do with local substitutes.
I would rather spend money to buy oranges, bananas, pawpaws or mangoes grown by our local farmers than buy apples and avoid paying any special taxes. It makes a lot of economic sense to me for the government to raise money for development by imposing a special tax on frivolous items like human hair, apples, potato chips and Mars Bars, which are imported with scarce foreign exchange.
It is rather unfortunate that the government bowed to pressure and reduced the special tax from 20% to I0%. That decision has not helped this country in any way unless the Golden Age of Business that we hear about has to do with buying anything from abroad and selling in Ghana. It is true to argue that overprotected industries stand the danger of remaining inefficient.
But it is unfair to conclude that the policy of special taxes has been a failure when it has barely been in operation for two years, one year of which was under a government noted for impeding the progress of local industry just because the owners were viewed as political opponents. It will also be pertinent to point out that the observation by Dr. Gockel that the trend in imports since the introduction of the special tax remains the same has to do more with the lack of political will to make it effective rather than an inherent weakness of the tax.
It was a weakness on the part of the government to bow to pressure and reduce the rate of the special tax. It also doesn't help when we pay lip-service to the slogan 'buy Ghanaian' and continues to allow the importation of goods we can produce in our own country
There is a law against the importation of over-aged vehicles into the country, yet it appears that law is not worth the paper it is written on.
When European Union or United States Iaw states that an item is prohibited from being imported into their territory, they mean just that and there is no way, apart from illegal concealment, to get such items into those countries. If government seriously wants to run a successful economy, then the first step it has to take is to enforce economic laws.
The distress action embarked upon by the VAT Service to recover unpaid taxes is a good example of economic law enforcement. The courts must deal drastically with any person or group that attempts to prevent, or worse still, to assault the VAT officials carrying out their duties. An assault on these officials is an assault on the law.
CAPONE'S PREDICAMENT
There is a story about the infamous Chicago mobster, Al Capone, who had trouble with the American government and sought assistance from his colleagues in the Mafia. When his friends realized Al Capone's predicament had to do with tax evasion they gave him this advice. 'Al'. they said. 'if you had murdered somebody, we would have gladly come to your aid. But since it is Uncle Sam's money you tried to keep, there is nothing we can do to help. Face the music alone'.
Al Capone was jailed for tax evasion and died in prison. This is just one example of how some countries take their economic laws very seriously
Let me suggest a way for the government to stop the importation of over-age vehicles. A heavy fine should be imposed on any shipping or clearing agent that handles such prohibited vehicles. That way the government will have the money to pay for stripping the vehicles before they are sent to the smelter. Any ship that brings such vehicles into our country should also be fined. If the Captain of the ship refuses to pay the fine he can keep the vehicle or drop it in the sea. Too many lives are being needlessly lost in accidents involving over-age and poorly maintained vehicles plying our roads.
A final comment on Dr.Gockel's point that the aim of the special tax was not for government to increase revenue but to assist struggling firms. The two are inextricably bound. The government cannot assist struggling firms with empty coffers. So the point does not carry much weight.
