{"id":210111,"date":"2016-04-29T07:42:22","date_gmt":"2016-04-29T07:42:22","guid":{"rendered":"http:\/\/citifmonline.com\/?p=210111"},"modified":"2016-04-29T07:42:22","modified_gmt":"2016-04-29T07:42:22","slug":"imani-alert-governments-tax-regime-hurts","status":"publish","type":"post","link":"https:\/\/citifmonline.com\/2016\/04\/imani-alert-governments-tax-regime-hurts\/","title":{"rendered":"IMANI Alert: How Government’s tax regime hurts and what to do about it"},"content":{"rendered":"
Ghanaian businesses make 33 different tax payments a year, spend 224 hours a year filing, preparing and paying taxes amounting to 32.70% of profits- DB Report 2016.<\/p>\n
Introduction<\/strong> Business Indicators to watch<\/strong> Manufacturing, Service and Agricultural sectors are reeling under difficult business conditions: high taxes, high utility tariffs, high interest rates, high inflation among others. These sectors will continue to remain uncompetitive for the foreseeable time.<\/p>\n The 2016 World Bank Doing Business (DB) Report regarding the \u201cPaying Taxes\u201d indicator paints a bad picture of Ghana: Ghana stands at 106 in a ranking of 189 economies. DB sheds light on how easy or difficult it is for a local entrepreneur to open and run a small to medium-size business when complying with relevant regulations. The DB \u201cPaying Taxes\u201d indicator measures among others the total number of taxes and contributions required, the method and frequency of filing and paying taxes, and the time required to comply with tax obligations.<\/p>\n At the local level, the Association of Ghana Industries\u2019 (AGI) Business Barometer Indicator (BBI) does the job quite well. The BBI is a quarterly study which measures the level of confidence in the business environment and expectations of private sector players as far as the macro economy is concerned. It has a baseline mark of 100 points, with points above the baseline indicating a high business confidence and points below the baseline indicating low business confidence.<\/p>\n Since the last quarter of 2013, the BBI has dipped below the baseline. In the second quarter of 2014 the index recorded 22 points, making it the lowest ever recorded. However, in the third quarter, it rose to 42 points and further to 98 points in the fourth quarter.<\/p>\n Since the last quarter of 2014, business confidence levels further dipped below the baseline to 85 and 87.9 respectively in the first and second quarter of 2015.<\/p>\n This low level of the index was largely attributed to the fact that power supply did not improve as expected. The third quarter of 2015 saw the BBI rise above the baseline revealing that a significant percentage of Ghanaian business owners were of the conviction that the business environment had seen some improvement despite the prevailing challenges in the economy.<\/p>\n It also indicated that more than half of respondents were optimistic of an improved business environment in the fourth quarter. This positive expectation could be attributed to the Ghana Cedi stabilization, improved power supply, the International Monetary Fund intervention (IMF Extended Credit Facility Program), and the inflow from the cocoa syndicated loan as well as the issuance of the Euro bond.<\/p>\n In contrast to the third quarter, the last quarter of 2015 saw the BBI fall to 95.94. During the period, a larger percentage of respondents (45%) attested that the business environment had remained the same since the third quarter while 31% of respondents also believed the conditions in the business climate had worsened.<\/p>\n This dip could be explained mainly by the fact that power supply improved at a relative slow pace as against the general expectation. The power crisis, which resulted in frequent load shedding, increased the cost of production as businesses either had to cut output or supplement power supply with power generators.<\/p>\n
\nGhana\u2019s tax regime has experienced some reforms in recent times, particularly between 2013 and 2016. These changes are diverse in nature \u2013 from upward adjustments in tax rates to the consolidation of tax laws. Evidently, not all of these changes have been welcomed by private sector players, who come first in bearing the brunt of the tax reforms. Indeed, this is quite obvious in the recent demonstrations we have seen regarding Government 2016 tax initiatives. Government expects higher revenue inflows in 2016 based on the consolidation of revenue collection efforts, introduction of new taxes and increment of existing ones.<\/p>\n
\nThe 2016 tax initiatives as noted earlier will visibly affect all the productive sectors of the economy, particularly manufacturing, whose performance was the most disappointing in 2015 with a 2% decline.<\/p>\n