Every business man would be happy to enjoy tax cut on his products to maximize profit. The New Patriotic Party in its 2016 promised to abolish a list of taxes described as “nuisance taxes” crippling the private sector and undermining ease of doing business should they win the election. The NPP government managed to give tax relief of over GH¢800 million to businesses in 2018 after winning the elections and abolished other taxes in 2017. The abolished taxes with the aim of providing friendly business environment included,
1 percent Special Import Levy;
17.5 percent VAT/NHIL on financial services;
17.5 percent VAT/NHIL on selected imported medicines, that are not produced locally;
Initiate steps to remove import duties on raw materials and machinery for production within the context of the ECOWAS Common External Tariff (CET) Protocol;
17.5 percent VAT/NHIL on domestic airline tickets;
5 percent VAT/NHIL on Real Estate sales;
Excise duty on petroleum;
Special petroleum tax rate from 17.5 percent to 15 percent;
Duty on the importation of spare parts;
Levies imposed on kayayei by local authorities;
These are good news for consumers. However, all those were ploughed into other areas making the abolished taxes irrelevant for businesses to plan. Taxes on fuel alone are about 70%. There is Energy Debt Recovery Levy of 41 pesewas per litre of petrol and diesel. Increase in fuel prices is a redirection abolished taxes and consumers have no choice since fuel a commodity used by all Ghanaian directly or indirectly.
Taxes on petrol per litre include, Excise Duty, 2.78 pesewas per litre;
Energy Debt Recovery Levy, 41 pesewas per litre;
Road Fund Levy, 40 pesewas per litre;
Energy Fund Levy, 1 pesewas per litre;
Price Stabilisation and Recovery Levy, 12 pesewas per litre.
There are other margins that include, Primary Distribution Margin, 4.5 pesewas per litre;
BOST Margin, 3 pesewas per litre; and
Fuel Marketing Margin, 1.5 pesewas per litre.
Each tax component and margins also attract 17.5% Value Added Tax (VAT), which the consumer also pays.
Remember each tax component and margins also attract 17.5% Value Added Tax (VAT), which the consumers in Ghana have to pay. Currently, Pump prices have shot up from the previous GH¢5.19/litre to about ¢5.38/litre representing a 3.7% jump in previous figures at the pumps. Prices on fuel were increased in 2017 and 2019 after abolishing certain taxes.
In 2018, the NPP government reduced electricity prices of businesses by 30% and for households by 17.5%. In July 2019, there was an increase of electricity price of 11% and in October same year of 5.6%.
Tax cut is important to enhance business growth; however, introducing the abolished taxes in different sectors by increase taxes means nothing. Currently Telecommunication Service Tax has beed increased from 6% to 9%.
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