Potential impacts of recently introduced taxes on agribusiness

The three new taxes introduced by the government of Ghana in 2023 – the Growth and Sustainability Levy Act (Act 1095), the Excise Duty Amendment Act 2022 (Act 1094), and the Income Tax Amendment Act 2022 (Act 1093) – have raised concerns about potential impacts on agribusiness in Ghana.

While the new taxes have been introduced to raise revenue and meet the conditions for a $3 billion IMF programme, these may pose challenges for agribusinesses, agripreneurs, and consumers, predominantly stakeholders in the agribusiness sector.

However, it is worth noting that these taxes build on previous amendments to tax laws that were introduced in the 2022 Mid-year Budget Review. Additionally, Ghana’s GDP grew by 5.4% in 2021, according to the Ghana Statistical Service, and the Economist Intelligence Unit revealed that Ghana’s real GDP growth strengthened in 2022, albeit slowing down in 2023-24 and picking up again in 2025-26.

It is also worth noting that stakeholders such as the Chamber of Agribusiness Ghana, the Peasant Farmers Association of Ghana (PFAG) and partners called on the finance minister to grant tax exemptions on agricultural commodities prior to the introduction of these taxes (as there was an earlier unilateral announcement of the suspension of tax exemptions to key agricultural equipment and raw materials).

Regarding corporate income tax, the general rate is 25%, but non-traditional exporters pay an 8% CIT rate, while banks lending to the agricultural sector pay a CIT rate. Mining and upstream petroleum companies pay CIT at a rate of 35%, while companies primarily engaged in the hotel industry pay a reduced rate of 22%.

Again, regarding value-added tax (VAT), the standard VAT rate in Ghana is 15%, and VAT is charged on the supply of goods and services where the supply is taxable.

We envisage the following as potential ramifications of the three new taxes imposed by the government on agribusinesses and recommend how our members can adjust to these actions.

Growth and Sustainability Levy Act, 2023 (Act 1095)

First, as stated in Clause 3 of the Act, since it is not an expense and hence not an acceptable deduction, it will raise the cost of doing business in Ghana.

Since it is not a tax deduction, agribusinesses may pass the cost on to consumers by raising the price of their goods and services, which could heighten inflation depending on how elastic consumer demand are for these commodities.

When agribusinesses cannot pass the cost on to consumers, they either have to absorb it themselves or transfer it by cutting back on production or supply, which means fewer jobs and fewer resources would be invested to produce goods and provide services.

Second, it will be challenging to collect this levy from mining and petroleum companies that have stability clauses in their agreements, which state that no change in fiscal legislation shall affect them until after their stability period (which can be anywhere from 15 to 25 years, depending on the agreement).

Those that don’t have such provisions will likely try to internalise them, which will raise their production costs and lower their profits, ultimately raising their taxable corporate income.

Third, the Financial Sector Recovery Levy of 5% imposed last year adds to the burden of the National Fiscal Stabilisation Levy’s repeal, making it more expensive for financial firms.

Customers are already receiving notices from their banks informing them of a pending increase in the prices they must pay for banking services. This could have an effect on the government’s efforts to expand financial access and increase lending to agribusiness, since individuals or agribusinesses who cannot afford banking services may begin to avoid them.

An inclusive stakeholder involvement could have been the obvious step, as it would have allowed industry stakeholders to make rate recommendations to the government and advocate for changes to corporate tax rates or royalties.

For the mining and petroleum industries, for instance, an increase in the royalty rate from 5-6%, rather than the 1% Levy, would have necessitated discussion for the suspension of portions of the stability clauses.

For the sake of efficiency and fairness, the financial sector should have been allowed to deduct at least one of the levies, such as the financial sector recovery levy after the Growth and Sustainability Levy became non-deductible.

When added to the 6% previously paid in straight levies for national health insurance (2.5%), the Ghana Education Trust Fund (2.5%), and the Covid-19 Health Recovery (1%), it’s clear that the new sectors should have been hit with a 1% Levy to get things rolling.

Income Tax (Amendment) Act, 2023 (Act 1094)

A new 35% band established ostensibly for the high-net-worth taxation policy is misplaced in the Income Tax Act, while a revision of the income tax bands to fit the minimum wage for 2023 is a typical and usual activity. Instead of changing the income threshold, the income bands might have been shifted to get higher earners into the current 30% bracket.

The GRA’s High Networth Individuals unit (HNIs) has a full roster of HNIs and is still compiling additional HNIs in order to ensure compliance by this segment of taxpayers; at the current rate of 30%, the country can collect more money than the increase in rates would cost.

It’s fascinating to see that these people pay taxes at the same rate (35%) as mining and petroleum firms, which is far higher than the rates paid by companies in the hospitality industry (25%), the banking sector (22%), leasing and agricultural sectors (20%).

If these wealthy people want to avoid paying taxes at a rate of 35%, why not form corporations and have their dividends subject to a final tax rate of 8%? The implementation of a withholding tax on the sale of assets and the settlement of liabilities is a positive step in the right direction. Since it is always based on self-assessment, only increased monitoring is required to guarantee compliance.

Refreshingly, it’s great that we can have a universal 5-year loss carryover, which is a fantastic policy move. It is necessary to keep an eye on businesses to ensure they don’t dissolve and reform after every five years to avoid paying taxes. A case of Sankofa is the restriction of foreign exchange losses and the capitalisation of the capital expenditure provisions of the Internal Revenue Act, 2000 (Act 592), as amended.

This is why we constantly advocate for stakeholder participation in the discussion of tax policies to ensure that such inconsistent tax policies are avoided. Since the accrual basis of accounting is generally recognised for tax purposes, this will result in substantial unrealised exchange losses for taxpayers, putting a strain on their ability to pay their taxes in a timely manner. The burden on taxpayers could have been reduced if we had agreed to accept some portion of unrealised exchange losses (maybe 30% or 50%), given that the difference between the date the loss would been incurred and the date it would actualise is merely a matter of timing.

Fifth, it is encouraging to see a programme aimed at reviewing income tax rates for temporary incentives and phasing them off gradually. This is especially true after 5 years when the loss incurred towards the united goal.

Excise Duty (Amendment) Act, 2023 (Act 1093)

Taxation is not all about raising revenue and so this Act should not be seen exclusively as a revenue raising measure but a measure to deal with importation and consumption of harmful goods. In as much as the increased raises will bring-in some revenue, that cannot be the main purpose.

Thus, the rates could have been discussed with stakeholders in the industry. Again, the regulatory bodies such as Food and Drugs Authority and Ghana Standards Authority should have been empowered to ensure compliance. For example, the sugar content in some of these beverages to deal with addressing the health concerns as in childhood diabetes among others should be the motivation for this tax. More importantly, given the negative effects of cigarette and alcohol use, a rise in excise tax on these products is warranted.

Moreso, it is in line with ECOWAS Directives and Ghana being a member has to comply. Again, we need a lot of monitoring to avert and deal with smuggling of these products when the taxes are imposed.

In addition to the impact of the excise duty, where businesses can pass on the increased duty forward by way of increase in prices, they may likely do so and that would impact prices and possibly commodity inflation. However, where they are unable to pass it forward, they may pass it backward by cutting down on production; thus, reducing costs of inputs including labour, hence a possible loss of jobs and an increase in unemployment.

This is so because the industries are already dealing with increases in the cost of utilities – water and electricity – as well as increase in VAT by 2.5%, along the straight levies. The proposal would be to revert the straight levies into claimable VAT to ease the cost buildup for businesses.

Recommendations to Agribusinesses

Diversify your raw material sourcing, making use of alternatives available locally.

Diversify sourcing of your raw materials and make use of alternatives that are readily available locally.

Leverage the value-based pricing method to cost your products and services

Consciously cut down on use of utility and fuel, i.e., electricity and water. Ensure your factory or agribusiness limits wastage. Start making investments in other forms of electricity generation like solar.

Track every transaction and keep appropriate records. Undertake periodic audits of your books and tax filings.

If it is in your power, band together with other agribusinesses/agripreneurs to engage in “group import of raw materials” or group sourcing.

Leverage suitable technologies to minimise labour cost and extra expenditure

Maintain constant engagement with the various stakeholder groups and associations along the value chain in order to safeguard your interests.

Agribusinesses should make it a priority to diversify their sources of credit; thus, a combination of equity, debt, venture capital, and grant funding could make the responsibility of paying back short-term investments less burdensome.