Industry players divided over 3% VAT rate

Industry players have expressed varying opinions on government’s introduction of the controversial 3 per cent VAT flat rate.

The policy has set members of the Association of Ghana Industries (AGI) on a collision course with their counterparts at the Ghana Union of Traders Association (GUTA).

This led to an intervention by parliament’s Finance Committee who invited the Finance Minister together with the industry players to a meeting on Thursday, 6 July, 2017 in a bid to get government to suspend the policy.

But President of GUTA, George Ofori, has lauded the policy, saying it will generate revenue for the country. He also added that prices of goods and services will see a decrease as a result of the policy.

“This system has been in place for the past 10 or more years. Have we realised any cascading effects when it was introduced earlier on? If it’s no, then why now? And if we talk about this cascading effect at every point in time, whether you take even one per cent, two, three, or four per cent or even 17.5 per cent, there will still be that aspect of cascading effect,” he stated.

He continued: “And so if we have about three per cent at let’s say level three, you multiply 3x3 and you are getting about nine per cent increase. Let’s take it for instance from the wholesaler to the retailer and the consumer.

"What about if we cancel the whole three per cent and we are to use the VAT of 17.5 per cent and that cascading effect is still there. You are talking about 17.5 per cent multiplied by three and you can do the calculation to know where that cascading effect will be.

“And so when we talk about this cascading effect of three per cent. We are at wholesaler, retailer, and then the consumer. But we are also telling government that there are lots of disparities because I’m paying and the next door neighbour is not paying. That is where there is a price differential".

"So we are urging government that once this three per cent has been introduced, we are urging government to make sure that every Tom, Dick and Harry pays the three per cent because if all of us are paying the three per cent, I don’t see why people will say there have been price increases here and there.”

Speaking to Class News after the crunch meeting, Finance Minister Ken Ofori-Atta described the meeting as a success. According to him, there will be a series of engagements with all stakeholders to ensure the policy is implemented smoothly.

“I think there is a much better understanding of what we are doing. The issue was the supposed cascading effect of the three per cent and truly in our view the 17.5 per cent also had a cascading effect and so this is a much lower level which also is deductible from the income tax".

"There are some issues with importers that we are trying to resolve, so we will have some more meetings on Monday and I think is an issue of explanations… We don’t think there is any illegality,” he said.

Meanwhile, Minority Members of Parliament have threatened court action over the implementation of the flat rate.

The Ranking Member of Parliament’s Finance Committee, Cassiel Ato Forson, described the policy as an illegality and called on government to immediately halt its implementation or face court action.