Don’t sacrifice industry for IMF intervention – AGI to government

The Association of Ghana Industries (AGI) has urged government not to imperil industry in its quest to obtain an International Monetary Fund (IMF) bailout.

Government – in a desperate attempt to meet conditions for the proposed US$3billion bailout to restore economic stability – is seeking to introduce a number of taxes: including the Growth Sustainability Levy bill of 2022; and an amendment to the Excise Duty Act, Act 879, which will result in a substantial increase to its rate for a number of manufacturing companies.

The Growth and Sustainability Levy is to be imposed on profit before tax of companies, and is expected to generate about GH¢2billion in revenue this year. Under it, breweries, banks, non-bank financial institutions, insurance companies and telcos, among others, will be required to pay a rate of 5 percent before tax under category A.

Category B, comprising mining and petroleum upstream companies, will pay 1 percent on gross production; while category C – companies that neither fall under A or B – will pay a rate of 2.5 percent before tax as Growth and Sustainability Levy.

Excise duty, on the other hand, seeks to impose a tax rate of 20 percent on ex-factory prices of the following: water, including mineral water of all descriptions – whether or not containing added sugar; and sweetened or flavoured drinks and non-alcoholic beverages.

Apart from mineral water and malt drinks, all other sweetened beverages – including processed fruit and vegetable juices – attract the same 20 percent excise duty.

Beer, stout and other indigenous beer that use less than 50 percent of local raw materials will attract an excise duty of 45.5 percent. Those that use between 50 percent and 70 percent will pay 32.5 percent, while above 70 percent will attract 10 percent.

Others are: cider-beer, 20 percent; wines including sparkling wines, 45 percent; spirits including Akpeteshie, 50 percent; cigarettes and cigars, 50 percent – including a specific duty of 28 pesewas, among many others.

However, the AGI argued that with industry already overburdened with hikes in electricity and water tariffs of 56.5 percent and 48 percent respectively within the last two review windows, and 2.5 increase in value added tax among others, the two tax proposals could be the final straw that breaks the back of manufacturers.

AGI’s Chief Executive Officer, Seth Twum Akwaboah, lamented that businesses were hoping to see signs of recovery this year, having been under pressure from an unstable business environment coupled with so much uncertainty since last year; hence, the tax proposals are not only harsh and ill-timed but could wipe domestic producers out of business and deny government much-needed revenue.

More importantly, the AGI warned that the two tax proposals, if allowed, could significantly diminish the competitiveness of producers within the continental free trade area framework.

While other countries within the Africa Continental Free Trade Area (AfCFTA) are incentivising manufacturers to take full advantage of AfCFTA, he said, Ghana is doing the direct opposite.

“If we are not careful, we might end up collapsing the few tax compliant ones. We have a huge informal sector and we are of the view that much more should be done to rope that sector into the tax bracket – rather than overburdening the few which are contributing,” he added.

Meanwhile, the Public Utilities Regulatory Commission has slapped beverage producers with a 172 percent water tariff hike. The regulator also placed beverage producers – commercial bottled water and drinks producers – under a new category last August, with a tariff of 316 percent.

Companies under the new category previously fell within the industry class – which saw a hike of 48 percent in last month’s review.

All these developments, he bemoaned, pose a serious threat to employment prospects and the survival of businesses.

According to the CEO of AGI, a number of industries are already downsizing employment.

In the AGI’s view: “The lessons of COVID-19 and the Russia-Ukraine war must teach us a big lesson – to quickly develop local supply chains and reduce the country’s dependence on imports; since the over-dependence creates panic whenever such sources face constraints. Such unbridled imports also put pressure on the cedi”.

For this reason, the AGI believes it is now the right time for Ghana to strategise and strengthen the capacity of industries with even more coherent policies and incentives, rather than imposing taxes which render local industry uncompetitive.