The operational cost of businesses and the unemployment situation in the country will be adversely affected by the recent passage of tax bills by Parliament, a tax expert and consultant, Dr Abdallah Ali-Nakyea, has observed.
He said the recently passed tax bills, particularly the Excise Duty and Excise Tax Stamp (Amendment) Bill, 2022 and the Growth and Sustainability Levy Bill, 2022, could result in businesses passing the increased duty on to consumers through price hikes, which could result in inflation.
In an interview on the implications of the three new tax bills approved by Parliament last Friday with the Daily Graphic last Sunday, 1st April 2023, Dr Ali-Nakyea indicated that businesses were already dealing with challenges such as the high cost of water and electricity, and that with the new tax bills coming into force, it would further increase their operational cost of doing business.
Three bills were passed by Parliament last Friday, with the third one being the Income Tax (Amendment) (No. 2) Bill, 2022. They are targeted at bolstering the sustainable generation of domestic revenue for the country.
The tax expert said where businesses failed to pass the taxes on to consumers, they might decide to reduce the cost of production, such as cut back on labour, which could further worsen unemployment levels, thereby worsening the unemployment situation in the country.
Dr Ali-Nakyea, who is also a Senior Lecturer at the University of Ghana School of Law, listed 11 implications for the country’s economy following last Friday’s parliamentary approval of the three major tax bills.
Aside from those above, he mentioned difficulty in exacting levies from the petroleum and mining sectors due to stability clauses and additional cost of rendering services to customers in the various banks.
He, however, said the introduction of withholding tax on the realisation of assets and liabilities was a welcome idea.
Dr Ali-Nakyea explained that what it meant was that with the law, when a person paid for a property or a chargeable asset, he withheld tax from the amount he or she was paying to the owner, instead of waiting for the owner to receive all the money before going to disclose to the Ghana Revenue Authority (GRA) how much he or she had gained.
“Now without monitoring, what if the value is understated for tax purposes?” he asked.
Growth, Sustainability Bill
Giving further details on the implications of approving the Growth and Sustainability Levy Bill 2022, he said the bill would eventually increase the cost of doing business, which would be passed on to consumers by increasing the prices of goods and services.
“Prices may increase, depending on the elasticity of demand for the good or service, leading to a possible increase in inflation,” he noted.
With respect to mining and petroleum companies, he explained that the levy would be difficult to exact from them, as “the stability clauses provide that no change in fiscal legislation shall affect them until after their stability period — which may range from 15 to 25 years, depending on the agreement”.
Those without such clauses, Dr Ali-Nakyea observed, would surely seek to internalise those levies, thereby increasing their cost of production and reducing their profits, which would impact negatively on the corporate taxes they would pay.
For financial institutions, the costs were equally higher because although the National Fiscal Stabilisation Levy was repealed with the newly passed levy, the institutions would still be saddled with the Financial Sector Recovery Levy of five per cent imposed last year, he indicated.
Income Tax Bill
The senior lecturer pointed out that the review of the income tax bracket to accommodate the minimum wage for 2023 was a normal and usual exercise.
However, he said the additional 35 per cent levy on income bracket introduced purportedly for the high net worth taxation policy was misplaced.
He suggested that monitoring was required to ensure that businesses did not close down and re-establish after every five years to avoid paying tax.
Excise Duty Bill
Dr Ali-Nakyea welcomed the passage of the Excise Duty and Excise Tax Stamp Bill, pointing out that the regulatory bodies — the Food and Drugs Authority and the Ghana Standards Authority — should be empowered to ensure compliance with, for example, the sugar content of some of the beverages to deal with health concerns, including childhood diabetes.