In a letter intercepted by Joy News, the AGI is urging the Minister of Finance, Ken Ofori-Atta, to “hold off the implementation of the 5% straight levy in its current state” to allow for a review that safeguards businesses and increases government revenue.
Parliament in August,approved three tax amendmentsannounced by the Finance Minister, Ken Ofori-Atta, during the presentation of the Mid-Year Review of the 2018 budget.
The three approved tax amendments included amendment to the Value Added Tax (VAT) law. This means that the Ghana Education Trust Fund (GETFund) and the National Health Insurance Levy (NHIL) will now stand alone as straight levies at 2.5% rate each.
The amendment to the VAT means the new tax rate, which was previously inclusive of the two taxes, reduces from 17.5% to 12.5% and a 5% straight tax.
The AGI in a letter to the Finance Minister states that the implementation of the straight levy and its ultimate impact on consumer pricing will significantly constrain business and increase the cost of living, thereby bringing economic hardship to the ordinary citizen.
“We, therefore, write to request your office to hold off implementation to allow for further engagement and fine-tuning,” AGI Chief Executive, Seth Twum-Akwaboah, signed the letter.
AGI states that its assessment shows that the new tax regime will lead to higher cost of production being passed on to the consumer.
Goods and services that attract the Flat Rate will increase in prices within the range of 15% to 20%.
“Most businesses in Ghana have wide distribution channels which typically run from manufacturer/importer – distributor – wholesaler-retailer. The compounding impact of the 5% straight levy cost through the various value chains sampled shows a price inflation to the consumer of 15% – 20%. This will significantly impact the purchasing power of consumers as retail pricing is estimated to go up by 15% – 20%,” the letter said.
“This will create significant operating capital challenges consequently constraining re-investment, capital expenditure and job creation opportunities.“
AGI is requesting the Finance Ministry to hold off the implementation of the levy in its current state to allow for their concerns to be addressed.