Government has stated that it would only take a second look at the newly introduced administrative measure in the tax exemption system, after it concludes a comprehensive review of the entire regime.

The measure which was announced in the 2017 budget statement requires business operators who are eligible for exemption from duties and taxes, to make an upfront payment of the taxes and then have them refunded after 30 days.

This, according to the finance ministry, is to check the irregularities in the current tax exemption regime. But many business operators, especially importers have been complaining about the measure saying it poses a cash flow challenge to their operations.

Speaking to Starr Business after an interaction with members of the Association of Ghana Industries (AGI) over the issue, a deputy finance minister, Kwaku Kwarteng said although he empathizes with the concerns of the business community, the move is necessary to correct the anomalies in the system.

“From the point of view of the business importer, if I have to pay money and get refund, it’s definitely an inconvenience. I sympathize with their concerns. But it’s also important to look at this from the government point of view. For those of us sitting at the government treasury, whose responsibility it is to ensure that government finds the money to do the thing that people want, we also consider that it is something that must be done”, he explained.

He has, however, assured that it may be relooked at after a holistic review of the entire tax exemption regime. This, he said could happen before the next budget is presented to parliament in November 2017.

“It is part of a comprehensive review of our exemptions regime. As soon we have finished with this review and we are clear in our minds that a lot of the irregularities have been removed, we’ll take a second look at this administrative measure” he assured.

The meeting brought together a number of businesses which have challenges understanding the new measure and how it is being implemented. Chief Executive Officer of the AGI, Seth Twum Akwaboah told Starr Business, the explanations by the deputy finance minister have been helpful. He’s however hopeful the concerns of businesses would be addressed sooner than later.

“You may have a good policy but implementation may have challenges because information may not have trickled down to all the people in the chain. So the business operators may have a challenge and they may not have a clear understanding of the policy you’re trying to implement. And even the custom officials; some are giving different interpretation to the policy.

Therefore the minister acknowledged that there’s a lot of work that needs to be done, as far as that is concerned, you cannot begrudge him. What is important is to carry on with the work and make sure that the issues that we raised are actually taken on board and resolved as soon as possible”, he stated.

Administrative Measure Unlawful

Meanwhile a tax consultant, Abdallah Ali-Nakyea has faulted government or acting unlawfully in the introduction of the tax retention policy without parliamentary approval. A letter signed by the Commissioner of the customs division of the Ghana Revenue Authority, Kuudamnuru John Vianney on March 21, 2017, directed all port stations in the country to implement the policy as captured in the budget.

But Mr. Ali-Nakyea said a law needed to have been passed to effect the implementation of this new measure.

“Under Article 174 of the constitution, it’s only parliament that can grant exemptions. So if parliament grants the exemption, and today, you, by a publication in the papers indicate that any person who has an exemption or not, has to pay duties and apply for a refund, the question is under what law are you operating? If you need to abolish the existing system, you need to pass a law. You don’t do that by a decree or a publication in the newspapers. If parliament which has the power to grant exemptions, you by publication say that exemption is not recognized, then you’re acting unlawfully”, he pointed out.

New Measure Counter Productive

According to the tax consultant and Managing Partner of Ali-Nakyea & Associates a firm of Tax Attorneys, Solicitors and Consultants, the measure may not yield the intended results as it could lead to bureaucracy and corruption in the tax exemption system. Speaking to Starr Business’ Tawakalitu Braimah, Mr. Ali-Nakyea opined posited that a better way of checking the abuse and irregularities in the system was to find and deal with the entities involved in these things.

“If it is because of the abuse of the exemption system, is it that there are no structures and systems to trace who is abusing the system and dealing with that person rather than generalizing it? Otherwise confidence in the system wanes”, he said.

He believes if this happens, it could contradicts government’s intention of creating a business friendly environment to engineer private sector growth. “Can we search for the people abusing the system; deal with them, withdraw their exemptions, and cancel them, while we let those who have genuinely acquired them to go on with their business”, he added.