AGI Urges Government to Streamline Ghana’s Tax System

The Association of Ghana Industries (AGI) has called for a revision of the country’s tax system, highlighting its negative impact on the growth of local businesses. According to AGI’s Chief Executive Officer, Seth Twum-Akwaboah, the current tax structure is not only unjust but also counterproductive, as it discourages private sector participation and contributes to low government revenue.

In an interview on the PM Express Business Edition, Twum-Akwaboah emphasized the need for tax reform, suggesting that simplifying and rationalizing the existing tax system would make it more efficient and easier for businesses to comply, ultimately boosting revenue collection for the state. He explained that the tax regime in Ghana is presently burdensome, particularly for businesses involved in importing raw materials. “For example, when you import raw materials and review the total declaration, more than 52 percent of the value of items goes into taxes,” he noted, expressing concerns over the high tax rates that businesses are currently facing.

Twum-Akwaboah further criticized the current Value Added Tax (VAT) system, stating that it does not benefit private businesses and needs to be reviewed. He pointed out an inherent unfairness in the system: “If I am a major distributor or operator in the formal sector, I am required to add VAT to my goods, but when someone in the informal sector sells the same items, no VAT is applied. This creates an imbalance that needs to be addressed.” He stressed the importance of rationalizing the tax regime to ensure that all businesses are treated equally and fairly, with a tax system that encourages growth rather than stifling it.

In his recommendations, Twum-Akwaboah urged the government to focus on deepening the dialogue surrounding tax rationalization. He believes that this would result in more efficient revenue generation for the country while fostering a more business-friendly environment. He also highlighted the significance of a balanced tax system in attracting more investment, which would help drive the country’s economic growth.

This call for tax reform aligns with the position of former President John Mahama, who has also advocated for streamlining the country’s tax system. Mahama expressed a commitment to reducing inefficiencies within the current regime, with the ultimate aim of making Ghana an attractive destination for businesses. His plan is to create a more conducive environment for investment, which in turn could help absorb the rising number of unemployed youth in the country.

Mahama’s proposal, which centers on reducing waste and enhancing efficiency within the tax system, is seen as a move to encourage foreign and local investment alike, thus stimulating job creation and contributing to the overall economic growth of the nation.

In summary, the AGI and former President Mahama agree that Ghana’s tax system needs reform in order to support local businesses, improve government revenue, and foster an environment conducive to investment. Rationalizing the tax regime and addressing issues of fairness and efficiency will be crucial in ensuring that the private sector is able to thrive and contribute to the country’s economic prosperity.

    The Association of Ghana Industries (AGI) has raised significant concerns about Ghana’s tax system, describing it as detrimental to the growth of local businesses. AGI’s Chief Executive Officer, Seth Twum-Akwaboah, pointed out that the country’s current tax structure is both unfair and discouraging to the private sector. He highlighted that this system is a key factor contributing to the country’s low revenue generation, which in turn undermines national development.

In a discussion on the PM Express Business Edition, Twum-Akwaboah explained that Ghana’s tax regime needs to be simplified and restructured to make it more efficient and manageable for businesses. He argued that by making the tax system easier to navigate, it would not only encourage businesses to comply but also result in more effective revenue collection by the government. “Currently, our tax regime is not in the best shape,” Twum-Akwaboah stated, pointing out the high taxes faced by businesses, especially those importing raw materials. He revealed that more than 52 percent of the value of imported goods is absorbed by taxes, which creates a significant financial burden on businesses.

He also criticized the current Value Added Tax (VAT) system, which he believes does not benefit businesses. One of his main issues with the system is the disparity between the formal and informal sectors. “If I am a large distributor in the formal sector, I am required to add VAT to the price of the products I sell. However, if someone in the informal sector sells the same product, they do not have to apply VAT,” Twum-Akwaboah explained. This disparity creates an unfair playing field, where businesses in the formal sector are at a disadvantage compared to their informal counterparts. He called for a rationalization of the tax system to ensure fairness and equity across all sectors.

According to Twum-Akwaboah, the best way to address these issues and improve revenue generation for the country is through a comprehensive review of the tax system. He stressed the need for deepened engagement with all relevant stakeholders to work towards rationalizing the tax structure. This, he believes, will not only benefit businesses but also create a more conducive environment for economic growth.

These concerns are not isolated, as former President John Mahama has also voiced his intention to reform the tax system. Mahama has promised to streamline the tax regime to reduce inefficiencies and waste, with the ultimate goal of making Ghana an attractive destination for both local and foreign investors. He believes that creating a more efficient tax system will help absorb the growing number of unemployed youth in the country by fostering an environment where businesses can thrive and create jobs.

Mahama’s vision for tax reform involves reducing bureaucratic hurdles and cutting unnecessary costs for businesses, which would increase investment and stimulate economic activity. His plan is to ensure that the tax system is more transparent, predictable, and beneficial for the country’s development. By doing so, he aims to position Ghana as a top destination for investment, which will drive job creation and economic growth.

In addition to addressing the challenges facing businesses, Mahama’s proposed reforms also focus on creating a tax system that is more aligned with the needs of the private sector. By making the tax system more business-friendly, he hopes to encourage entrepreneurship and foster the growth of small and medium-sized enterprises (SMEs). This will help diversify the economy and reduce reliance on government spending.

Both the AGI and former President Mahama agree that reforming Ghana’s tax system is essential for the growth of local businesses and the country’s economy. Simplifying and rationalizing the tax regime would level the playing field for businesses, ensure fair competition, and ultimately drive economic prosperity. The call for reform also underscores the importance of creating a tax system that encourages investment, boosts revenue, and contributes to the overall well-being of the nation. By addressing the inefficiencies within the current system, Ghana can pave the way for a more sustainable and prosperous economic future.