Lead partner for PFM Tax Africa Network, Seth Terkper, has said Ghana’s competitiveness under the African Continental Free Trade Agreement (AfCFTA) is at stake.
According to the former Minister for Finance, straight levies such as the GETFund and NHIL as well as the recent Covid-19 recovery levy charged on goods and services will add to the cost of exported goods under the trade pact.
Making the assertion at the second edition of the PFM Tax Africa Network Dialogue Series themed 20 Years of VAT: The Good, The Bad and The Ugly, Mr Terkper intimated that the separation of GETFund and NHIL from the VAT coupled with the Covid-19 levy charge denies businesses the needed input credit tax and refunds.
“The law now says businesses can no longer get input credit and refunds on taxes paid on inputs as allowed previously, so what happens now is that businesses add what they were supposed to get in the form of input tax credit and refunds to the cost of goods and services and that will definitely result in higher prices than when GETFund and NHIL were part of VAT and input tax credit and refunds were claimed by businesses,” Mr Terkper stated.
“And you see, when prices are that high, it makes businesses uncompetitive, especially for those exporting,” he added, stating further that unlike the VAT which is zero-rated on exports, the GETFund and NHIL are not zero-rated on exports.
Read: Equip GRA to tax new economy for more revenue – Seth Terkper tells government
“Because you see, if you break the VAT into straight levies and have 5% tax charge for NHIL and GETFund, and then have VAT which is 12.5%, unless you have a special provision which says the straight levy should also be zero on exports, then the zero-rate VAT on goods for exports does not apply in the case of the NHIL and GETFund. So in effect you will be exporting the 5% NHIL and GETFund charge to the country’s exports to other African countries. Meanwhile, Nigeria and Ivory Coast are not doing same, they do not charge any straight levy on exports and they are zero-rate VAT on exports,” he emphasized.
With the implementation of AfCFTA, the African Continent has become the biggest trade bloc in the world in terms of participating countries and population. The trade pact is anticipated to boost intra-trade among countries on the continent from 15 percent to around 50 percent in 2030 and further to 80 percent by 2050.
Ninety (90) percent of goods to be exported and imported under the trade pact are tariff and duty-free.
The PFM Tax Africa Dialogue Series has been put together to encourage apolitical discussions on fiscal policies, revenue mobilisation, resource exploitation and management, national expenditure among others.
The dialogue series is held each quarter with each dialogue focusing on a pertinent issue of relevance to the management of the Ghanaian economy and its natural resources especially within the fiscal space.
