Surging import tax exemptions worry gov’t

Dr. Edward Larbi-Siaw, a tax policy advisor at the Ministry of Finance (MoF), has expressed concern about the raise in exemptions from various import duties as it is affecting national revenue mobilisation.

Government has tasked the Ghana Revenue Authority (GRA) with a revenue collection target of GH¢21.98billion for the 2015 fiscal year. This, the Authority says, is challenging; but with appropriate strategies, hard work and resilience of the staff, it is achievable.

“Government in this year’s budget is making efforts to mobilise enough revenue to cut down the national deficit. In view of this, it is amending all laws concerning exemptions granted to importers so as to ensure the country gets value for money from such exemptions.

“The Ghana Investment Promotion Centre (GIPC) Law has been reviewed, and the normal exemptions which can now be find in the income tax law are now being discussed in parliament and will be finalised by next week,” Dr. Larbi-Siaw told B&FT after a two-day forum organised by the Ghana Revenue Authority (GRA) to educate Freight Forwarders on the National Single Window Project. It was under the theme ‘Intra-AfricanTrade -- The Role of the National Single Window’.

During the first six months of the year, total exemptions granted to importers increased to GH¢4,173million, as compared to same period last year which recorded GH¢2,106million. In 2014 imports that were zero-rated formed 12.89 percent; in the first half of 2015 this went down to 6. 91 percent.

Available data show an increase in imports associated with five percent tax exemption from five percent last year recorded 14.20 percent in the first half of this year, while that of 20 percent tax exemption went up from 20.44 percent in 2014 to 22.43 percent in the first half of the year.

In 2014 tax exemptions accounted for about 3.3 percent of Gross Domestic Product (GDP), about GH¢3.2billion, against GH¢2.95billion recorded in 2013. An estimated US$876million was also lost to direct tax and VAT exemptions in 2012.

Dr. Larbi-Siaw reminded freight forwarders of their primary responsibility to clients, adding that the core responsibility is to ensure that the state gets its revenue.

He urged the Freight Forwarders to support the country’s revenue collection drive, as it is critical to reducing interest. “If the country is not mobilising enough revenue, it has to borrow from local banks; a situation that pushes interest rates up.”

He described the Single Window system as one that will allow the Customs Division to deliver on its core mandate. The system replaces Destination Inspection.

Destination Inspection is a concept that was introduced to enhance Customs functions as a stop-gap measure while waiting for reforms and modernisation.

The Single Window Environment is a cross-border ‘intelligent’ facility that allows parties involved in trade and transport to lodge standardised information, mainly electronic, with a single entry point to fulfil all import, export and transit-related regulatory requirements.

With the establishment of a National Single Window in Ghana, all shipment activities and transit-related businesses will be integrated to achieve efficiency and enable the government to generate more revenue at the ports.

In Ghana the concept of destination inspection was introduced by the government in 2000 to replace the pre-shipment inspection system, which involved the inspection of imports before shipment from the country of supply. Since then, DICs have been mandated to inspect imports at the country’s ports of clearance

The country, after 15 years, has decided to scrap the system in principle with WCO regulations, which maintain that any country that wants to rely on contracting core Customs services to private companies should as well disband its Customs administration.

The forum was organised in collaboration with the Ghana Institute of Freight Forwarders (GIFF) and the Council for the Regulation of Freight Forwarding in Nigeria (CRFFN), and was aimed at increasing the knowledge of stakeholder groups’ representatives.

The forum discussed a wide range of issues which are critical to the Customs Division taking over core functions of valuation, classification and risk management from private Destination Inspection Companies (DICs) while creating a National Single Window for the country, and brought participants from Nigeria’s industry.

Dr. Eugene Nweke, President of the National Association of Government Approved Freight Forwarders, said Ghana’s decision to scrap the role of DICs is laudable and advised freight forwarders in the country to use the system’s ability of interactivity, accessibility, predictability, competitiveness, sustainability and reliability as benchmarks, and advise themselves if the system fails such standards.