Ghana’s manufacturing industry at risk as government proposes new taxes
Ghana’s manufacturing industry is facing a challenging period, with the Association of Ghana Industries (AGI) calling on the government to avoid introducing new taxes that could imperil the sector’s future. The government is currently seeking a US$3 billion bailout from the International Monetary Fund (IMF) and has proposed a number of new taxes as part of the conditions for the loan, including the Growth Sustainability Levy bill of 2022 and an amendment to the Excise Duty Act, Act 879.
The Growth and Sustainability Levy will be imposed on the profit before tax of companies, with breweries, banks, non-bank financial institutions, insurance companies, and telcos among others required to pay a rate of 5 percent before tax under category A. Meanwhile, category B, comprising mining and petroleum upstream companies, will pay 1 percent on gross production, while category C will pay a rate of 2.5 percent before tax. Excise duty, on the other hand, seeks to impose a tax rate of 20 percent on ex-factory prices of certain products, including water, sweetened or flavored drinks, and non-alcoholic beverages.
However, the AGI has expressed concern that the proposed taxes could have serious consequences for Ghana’s manufacturing industry, which is already struggling under the weight of other recent increases in electricity and water tariffs and value-added tax. According to Seth Twum Akwaboah, the AGI’s CEO, the taxes could be the final straw that breaks the back of manufacturers, wiping out domestic producers and denying the government much-needed revenue.
Moreover, the AGI has warned that the proposed taxes could significantly reduce the competitiveness of producers within the Africa Continental Free Trade Area (AfCFTA) framework. While other countries in the region are incentivizing manufacturers to take full advantage of AfCFTA, Ghana is doing the opposite, potentially harming its ability to compete with other African nations.
Akwaboah has urged the government to focus on developing local supply chains and reducing the country’s dependence on imports, arguing that this would help to build a more resilient manufacturing sector. He also stressed the need for more coherent policies and incentives, rather than imposing taxes that render local industry uncompetitive.
The AGI’s concerns come at a time when the manufacturing sector is already facing significant challenges. The Public Utilities Regulatory Commission has recently increased water tariffs for beverage producers by 172 percent, while the regulator has also placed commercial bottled water and drinks producers under a new category, with a tariff of 316 percent.
All of these developments pose a serious threat to the survival of businesses and employment prospects. The AGI has noted that a number of industries are already downsizing employment, and there is a risk that more jobs could be lost if the proposed taxes are implemented.
In light of these challenges, it is essential that the government works with the manufacturing industry to identify new opportunities for growth and development. The lessons of the COVID-19 pandemic and the recent Russia-Ukraine conflict have demonstrated the importance of building local supply chains and reducing dependence on imports. By developing a more resilient and competitive manufacturing sector, Ghana can position itself for long-term success and create new opportunities for its citizens.
