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Ghana News - More excise duty concessions needed to boost local industry - Analyst

More excise duty concessions needed to boost local industry - Analyst

Source: Fidel Amoah, Content Manager, Lamudi Ghana
Date: 24-11-2015 Time: 06:11:14:pm

An economic analyst at Databank, Courage Kingsley Martey is calling for more excise duty concessions to encourage the use of local materials.

Mr Martey said that an adoption of local materials would support the growth of the local industry and yield more tax returns for the government. This would ultimately lead to growth in the Ghanaian economy and better stabilize the cedi.

The current tax administration grants breweries an excise duty reduction on a sliding scale to companies using local raw materials. This means that breweries stand to benefit lower excise duties should they increase their adoption of local materials.

Mr Martey believes that replicating this tax incentive in other critical sectors of the economy, such as real estate would improve the local economy.

“We need to do a thorough analysis of our tax system and introduce policies to encourage the use of local materials and stimulate growth of the local industry. There should be lower taxes on local raw materials that are used to support the growth of the local industry,” he said.

“One major tax policy I subscribe to is the excise duty reduction on a sliding scale for breweries. I think that’s an example of the tax regime we need to practice so that foreign companies that are operating in Ghana would be encouraged to use domestic raw materials,” he added.

Mr Martey said that a replication of this tax policy would not only boost the local industry, but mitigate the foreign exchange pressure on the cedi.

“Adopting that tax regime would boost domestic raw material production for foreign companies operating in Ghana. This would mean less foreign exchange pressure because importation of these materials would reduce, cutting down on the need for foreign currencies,” he said.

Ghana’s real estate was recently included in the list of items liable for value added tax. Though the industry secured a 5 percent rate in comparison to the universal 17.5 percent, Mr Martey suggested that it could do more harm than good to the economy.

“Right now, it shouldn’t be about increasing tax rates  but focusing on improvement and enhancement of efficiency in tax administration. The tax system must avoid an incidence of imposing a levy on every sector of the economy which shows signs of growth potential. We need to allow the growth trend observed in certain key sectors to gather momentum before deciding how much tax to impose on their operations. This would be a good way of allowing “growth-inertia” to develop in economic activity.

“For a sector such as real estate, introducing new taxes would inevitably increase the default rate in the sector. Already, the cedi depreciation has led to higher mortgage repayments and the introduction of a five percent VAT is going to further burden homeowners,” he said.

Managing Director of Lamudi Ghana, Akua Nyame-Mensah said: “Infrastructure, which includes real estate, is one of the key drivers for any economy. It has the potential to create jobs, stimulate growth and ensure that a country develops.

“Ghana is in an interesting situation at the moment. The country enjoys a lower middle income status but that has led to smaller funding from donor partners. As such, taxes form an important source of revenue for the government to continue its developmental agenda.

“Though taxes are essential, there is the need to find a fine balance to ensure that sectors such as real estate does not become negatively affected. We have to take into consideration that real estate is still in the infancy phase so incentives have to be in place to encourage investment.

“Over taxing the industry could lead to higher housing prices, preventing many house hunters from acquiring a home.”

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