The Association of Ghana Industries (AGI) has voiced serious concerns regarding Ghana’s tax system, characterizing it as excessively burdensome and detrimental to business growth and competitiveness. Seth Twum-Akwaboah, the CEO of AGI, has particularly criticized the high taxes levied on businesses, especially on imported raw materials, claiming that these taxes significantly hinder the expansion of the industrial sector. He pointed out that over 52% of the declared value of imported items goes towards taxes, a figure he deems excessively high and unsustainable for businesses trying to thrive. This heavy tax burden, according to the AGI, discourages investment, stifles production, and ultimately impedes economic growth. The AGI believes that a more rational and competitive tax system is crucial for fostering a conducive business environment in Ghana.
A key issue raised by the AGI is the disproportionate tax burden placed on businesses operating within the formal sector compared to their counterparts in the informal sector. Mr. Twum-Akwaboah highlighted the unfair competitive landscape created by this disparity, citing the example of Value Added Tax (VAT). While formal businesses are obligated to charge VAT on their sales, informal businesses often evade this tax, giving them a significant price advantage and placing formal businesses at a competitive disadvantage. This uneven playing field, according to the AGI, not only discourages compliance but also undermines the growth and sustainability of formal businesses, which contribute significantly to government revenue and overall economic development. The AGI argues that addressing this disparity is essential for creating a level playing field and fostering a more equitable business environment.
The AGI’s concerns extend beyond the high tax rates and encompass the overall structure and implementation of the tax system. Mr. Twum-Akwaboah emphasizes the need for urgent reforms to address the inherent unfairness and create a more conducive environment for businesses to thrive. The AGI believes that a more streamlined, transparent, and predictable tax system would encourage investment, boost productivity, and enhance the competitiveness of Ghanaian businesses in both domestic and international markets. This, in turn, would contribute to job creation, increased government revenue, and overall economic prosperity.
The AGI argues that a comprehensive review of the current tax regime is necessary to identify areas for improvement and develop strategies to optimize tax collection while minimizing the burden on businesses. This review should consider not only the rates of various taxes but also the processes involved in tax administration, ensuring they are efficient, transparent, and user-friendly. The AGI advocates for a more collaborative approach to tax policy development, involving stakeholders like themselves in consultations to ensure that the tax system aligns with the needs of the business community and contributes to sustainable economic growth.
Furthermore, the AGI emphasizes the importance of enhancing tax compliance, particularly within the informal sector. This could involve simplifying tax procedures, providing education and support to informal businesses, and implementing effective monitoring mechanisms to ensure compliance. Bringing more businesses into the formal tax net would broaden the tax base, allowing for potentially lower tax rates for all businesses while still generating sufficient revenue for the government. This would create a fairer and more sustainable tax system, benefiting both businesses and the government.
In conclusion, the AGI’s call for tax reforms reflects a growing concern among businesses about the current tax regime in Ghana. The AGI argues that the high tax burden, coupled with the disparity in tax compliance between formal and informal sectors, creates an unfavorable business environment that hinders growth and competitiveness. The AGI advocates for a more rational, equitable, and efficient tax system that supports business growth and contributes to overall economic development. They believe that a comprehensive review of the current tax system, coupled with increased engagement between the government and the business community, is essential for developing and implementing reforms that benefit all stakeholders and foster a more vibrant and sustainable economy.
