The leadership of the Food and Beverage Association of Ghana has called on the government through the Ministry of Finance to announce major tax cuts for businesses in its 2024 budget.
Addressing the media at a press conference on Monday, October 23, 2023, the Executive Chairman of the association, Mr. John Awuni, intimated that introducing major tax cuts would enhance economic growth among the business community to achieve the desired economic sustainability.
“We strongly advocate for major tax cuts and the cancellation of some taxes in the 2024 fiscal year. This will spur the gains the economy has started making to sustainable levels. The business sector is currently riddled with too many taxes, levies, and duties and indeed an overtaxed economy, thereby stifling growth. The government stands to rake in more revenue for development if taxes are reduced and some are canceled. Currently, prices of goods and services are very high consequently reducing the demand for these goods and services. Considering the low wages and salaries in the country, the government can trigger higher demand for goods and services in the private sector if taxes are reviewed downwards.” He said.
The Executive Chairman of the association disclosed that its members are currently recording low sales, which it attributes to high taxes and levies imposed on their goods, and is therefore urging the government to cut down on taxes to increase demand for the goods.
“Increased demand for goods will obviously lead to higher sales volume, higher production levels in industry and consequently more revenue for the government. The basic economic principle of the higher the price, the lower the demand cannot be ignored in the case of Ghana.
The Food and Beverages Association is therefore of the firm belief that the gains the economy is beginning to record could be sustained for long-term growth and development if the private sector is relieved of some of the burdensome taxes either in the form of corporate tax, consumption taxes, or income tax,” Mr. Awuni added.
Find below full speech
20th October, 2023
PRESS RELEASE
OVER TAXATION IS NOT THE ANSWER TO OUR CURRENT ECONOMIC CONDITIONS
Governments over the years in Ghana have tried unsuccessfully to maintain stable macro-economic growth especially growth emanating from the private sector. No government has successfully engineered stable economic growth up to a decade. Successive governments blame each other for the woes of the country. Ghana has visited the IMF seventeen (17) times in our history with each visit prescribing relatively hasher economic conditions albeit higher taxation for the citizenry. Indeed, if higher taxes were the key to our economic development, Ghana would have been really developed with citizens enjoying lower cost of living among others. However, studies have shown that Ghana is among the top countries with higher cost of living. Prices change very often and in some cases by the day.
The Food and Beverage Association of Ghana is of the firm belief that the private sector which is the engine of growth can really sustainably perform well and spur the desired economic growth in the long run if the government of the day reduces the current level of high indirect taxes and levies, consumer and profit deductions which are non tax-deductable.
Several international studies have established that tax cuts have positive effects on growth, although some papers note that the strength of this effect depends on which taxes are cut, for whom and when.
Indeed, the current government while in opposition noted that no government can tax its citizens to prosperity. And that when given the power, they were going to move the country from taxation to production. Nuisance taxes were going to be removed among others.
It is in this light that we strongly advocate for major tax cuts and the cancellations of some taxes in the 2024 fiscal year. This will spur the gains the economy has started making to sustainable levels. The business sector is currently riddled with too many taxes, levies, duties and indeed an overtaxed economy, thereby stifling growth. The government stands to rake in more revenue for development if taxes are reduced and some cancelled. Currently, prices of goods and services are very high consequently reducing the demand for these goods and services. Considering the level of low wages and salaries in the country, the government can trigger higher demand for goods and services in the private sector if taxes are reviewed downwards.
Increased demand for goods will obviously lead to higher sales volume and higher production levels in industry and consequently more revenue for the government. The basic economic principle of the higher the price, the lower the demand cannot be ignored in the case of Ghana. At the moment, sales volumes and sales receipts among industry players are very low and we attribute it to the high prices of goods as a result of the numerous and high taxes and levies imposed.
The table above indicates that the Ghanaian consumer in some cases pay up to 100% as indirect taxes and levies on the cost of the item. For example the price of a bag of rice which is a staple in the country is currently sold above the monthly salary of most low earned workers such as waiters, cleaners and drivers. These category of workers also have families to take care of besides the rent and utilities they have to pay monthly. This slows down the rate of sales turn over and volumes which in turn impacts on profitability and the growth of business. The current high levels of unemployment especially among the youth depicts the poor performance of the private sector. Every economy thrives on the performance and resilience of its private sector and in the case of Ghana the private sector is terribly underperforming due to high cost of doing business and lower sales volumes due to over taxation of the sector.
The Nigeria market is peculiarly attractive in the sub region because of the tremendous high sales volumes the market offers to businesses. There is clearly a direct link between sales volumes and business growth and profitability as well as the amount of taxes the government mobilizes for development.
The Food and Beverages Association is therefore of the firm belief that the gains the economy is beginning to record could be sustained for long term growth and development if the private sector is relieved of some of the burdensome taxes either in the form of corporate tax, consumption taxes, or income tax. When businesses are overtaxed, they have nothing left to invest in to research and development for business expansion. And when businesses fail to operate at their optimum level, they are unable to enjoy the benefits of economies of mass scale production. China is doing much better due to the benefits of mass scale production their private sector is enjoying.
Higher taxes is a major killer of businesses. Ghana has tried the option of higher taxes for decades and yet our economy keeps failing, it is time to try the option of tax net expansion, with lower taxes and scrapping unfriendly levies and duties, and business friendly taxes in the 2024 fiscal year.
Smuggling of goods such as rice, sugar and general fast moving consumer goods is becoming attractive due to the over taxation of the formal sector.Together, we can!!! Let’s say no to higher taxes and over taxation of the productive sectors of our economy.