Once again, the Government is moving with indecent haste to bulldoze landmark legislation reforms without offering the country an opportunity for a thorough examination and study of their merits and pitfalls. A Bill to introduce a Value Added Tax (VAT) with effect from 1 January 1995, gazetted only on 3rd June 1994 without any public education or discussion, is expected to pass through all its Parliamentary processes and become law before 29 July 1994.

Coming so soon after the shocking and disastrous consequences of the ill-prepared and hastily introduced Educational Reform Programme and the embarrassment of the President having to ask Parliament to rewrite the new Investment Law even before it can take effect, the New Patriotic Party would advise the government to withdraw the VAT Bill from Parliament to allow for a more careful and detailed study and review of its purported advantages, as well as the inherent handicaps which may mitigate against the achievement of its set objectives and targets.

The introduction of VAT will undoubtedly increase the tax burden on virtually all Ghanaians. I twill also introduce yet more bureaucratic structures that will only bring on new frustrations to the productive private sector whilst increasing an already bloated Government machinery and cost.

VAT WILL ALMOST CERTAINLY INCREASE THE RETAIL PRICES OF MOST GOOD AND SERVICES, INCLUDING LOCALLY PRODUCED FOODSTUFFS AND PROPERTY RENTS, TWO OF THE MOST IMPORTANT AREAS OF EXPENDITURE FOR THE MAJORITY OF THE POPULATION WHO ARE ALREADY LIVING BELOW THE POVERTY LINE. MOST BUSINESSES WILL ALSO LOSE OUT ROM THE COMBINED EFFECTS OF THE INEVITABLE INCREASE THAT COMPLIANCE WITH THE NEW LAW WILL ADD TO THEIR OPERATING COSTS, AND THE CERTAIN REDUCTION ID DEMAND FOR THEIR GOODS BECAUSE OF HIGHER PRICES.

The NPP believes that there are many disturbing issues, which if not resolved, will probably work against he very advantages that VAT is supposed to offer over the Sales Tax it is intended to replace. VAT's major advantage of widening the present tax revenue base will probably be nullified by the globally acknowledged. major administrative and operational difficulties associated with its collection, a fact which has made it a "tax of last resort" in most countries.

Our experience with the collection of sales tax would tend to suggest that creating an entirely new service to administer VAT will not necessarily overcome the problems. The perceived advantages of VAT of a self policing mechanism which also reduces the level of tax avoidance and evasion would be hard to realise in our environment. Self policing presupposes that most businesses will have the capacity to keep proper records of their transactions. It is doubtful if they can, even if they are willing to. Alas, the recent reports of endemic and systematic fraud in CEPS' collection of Sales and Excise do not offer any real comfort of better performance from a new VAT service.

The NPP believes that a hasty introduction of VAT into Ghana will not succeed for the simple reason that much of the business here is conducted in the retail sector by small firms and individuals who are just not ready to cope with VAT. A combination of low literacy rate and largely informal ways of doing business does not seem to be the ideal environment to push through a very sophisticated and unfamiliar tax system without proper education of the business community.

Given the increased hardship that VAT will bring immediately to all Ghanaians in the form of higher prices, the country must be provided with convincing evidence, both from expert projections of our situations and demonstrated performance in environments similar to ours, tat VAT will yield more revenue than the Sales Tax it is going to replace.

In its phenomenal rush to impose yet another punitive tax, the Government has not presented Parliament with any Regulations to support the proposed Bill. This means that tour legislators are being asked to rubber stamp one of the most important and wide reaching legislations without knowing the Rate of Tax, the threshold with respect to taxpayers, and most importantly, how the tax will operate in practise.

There is also emerging suspicion that many of the provisions of the Bill contravene fundamental Articles of the Constitution. The case for an immediate withdrawal of the VAT Bill and more thorough consideration of its immediate applicability in Ghana is overwhelming and the NPP urges Government to stop the on- going Parliamentary consideration now.

FINALLY, THE NPP WOULD LIKE TO REITERATE ITS ADVICE TO GOVERNMENT TO GIVE MORE CONSIDERATION AND THOUGHT TO REDUCING THE LEVEL OF GOVERNMENT EXPENDITURE AS A MORE PRUDENT AND DESIRABLE WAY OF BALANCING THE BUDGET, RATHER THAN ALWAYS TRYING TO FIND NEW WAYS TO INCREASE THE ALREADY BURDENSOME TAX ON THE MORE PRODUCTIVE SECTORS OF THE GHANAIAN ECONOMY.

J. AGYENIM-BOATEN GENERAL SECRETARY