Opinions Wed, 18 Nov 2020

Free importation duty on tools, machines and equipment for TVET related activities

Ghanaians have read from manifestos and have heard major political party leaders promising “Free Technical and Vocational Education and Training (TVET)” during the year 2020 elections era. The rationale for “Free TVET” is claimed to be based on building capacity in employable skills, job creation, and entrepreneurship. Also, it is expected that free TVET will expand the manufacturability and production prowess of Ghanaian companies in key sectors like agriculture, energy, and construction. The idea of free TVET in Ghana is laudable and its implementation will certainly boost Ghana’s human capital.

It will help build the needed infrastructure for manufacturing, thus contributing to achieving the nation's industrialization agenda. However, Free TVET is meaningless if the importation of tools, machines, and equipment is not free in Ghana. This article proposes free importation duty on tools, machines, and equipment for TVET related activities. Also, the article is to spur the creation of a “movement” in Ghana to champion the proposed initiative.

With free TVET, Ghana government would be at the forefront to equip her existing and yet to be established training institutions with tools, machines and equipment. Government training institutions would be at an advantage by receiving such tools and equipment at no cost. The question is, would the government provide private training institutions free tools and equipment? Secondly, although the government’s plan to provide set-up kits to graduates from TVET institutions and artisans in the informal sector is inspiring, the initiative is not sustainable.

The matter at stake is the high cost of importation duties on tools, machines and equipment. Under the current regime, customs duty on imported tools, machines and equipment is between 30-50%. As importers pay high duties, they, in turn, sell these items at expensive prices to end-users. Moreover, after paying about 50% customs duties on equipment imported, both the importer and the end-user pay a total of 6% value-added tax (VAT) on the cost of the equipment to Ghana Revenue Authority (GRA). In events where the importer makes a profit, 25% of the profit value must be paid to GRA. Cumulatively, the government receives over 80% taxes (customs duties + taxes paid to GRA) on imported tools, machines and equipment. A piece of tool or equipment cost more in Ghana than in developed countries like Germany, Finland, UK, USA, etc. Therefore, at this absurd rate of taxes, how can Ghana be competitive in product manufacturing, and in another breath accelerate the industrialization agenda of Ghana?

High importation duties on tools, machines and equipment create a two-way adverse effect for importers and end-users. Therefore, importers turn to lose motivation to import quality items of standard while end-users resort to inferior and conventional tools. End-users of tools, machines and equipment include companies, private training providers, artisans in the informal sector, and individuals. Interestingly, graduates from TVET institutions are also in the value chain. The need for tools, machines and equipment to commence businesses is very critical in the sphere of manufacturing and production. Therefore, as tools, machines and equipment are mostly used for TVET related activities such as education, training, manufacturing and production purposes, Ghana government should make deliberate efforts to scrap the importation duties.

In conclusion, to efficiently implement free TVET, accessibility of quality tools and equipment at a low cost is a critical factor. On taxes, I recommend that the government takes a reverse approach in receiving such revenues on the use of tools, machines and equipment in Ghana. The reverse approach should be a mapping and tracing methodology inter-linked with a digitized database. Also, I encourage importers of tools, machines and equipment, TVET providers, artisans in the informal sector, graduates and students with TVET background to create a movement to champion this proposed initiative.
Columnist: Dr. Emmanuel Afrane Gyasi