Trader Associations Weep Over ‘Back-Door’ Taxes

It appears government’s decision to impose a 17.5 percent VAT on mobile phones is causing consternation among traders and some economic thinkers.

The Ghana Union of Trader Associations (GUTA) has fired the first salvo and is asking government not to contemplate any such imposition. GUTA’s point is that while they vehemently opposed a 10 percent levy slapped on their businesses as a result of ECOWAS’ Common External Tariff regime (CET), it is now being compounded with the 17.5 percent VAT – which it believes is rather harsh. Factoring both taxes, GUTA has rightly concluded that in sum the tax component for mobile phones is now 27.5 percent!

On the other hand, an economist with the University of Ghana, Dr. Ebo Turkson, believes the tax will hike the price of mobile phones in the country – which he deems an important instrument in any economy. On the basis of this, however, he also is inclined to believe the move will distort efforts at driving a cashless economy.

He argues that the move could restrict access to mobile money use, which dwells largely on mobile phone ownership.

Also in the fray is the Mobile Phone Dealers Association – which is resisting the imposition of further taxes and levies. The group argues that the move will affect their profit margins and eventually kick the majority of them out of business.

Clearly, the move has engendered some public debate; and although government is attempting to improve its revenue generation sources in line with IMF recommendations, it is clear some constituents are not pleased with the intended move.

It also defeats government’s assurance that the economy will be built on production or productivity, rather than on taxation. What then has prompted this sudden reversal? Based on campaign promises, a lot of trader associations like the spare-parts dealers at Abossey-Okai demonstrated a lot of goodwill when this administration won the 2016 December elections by reducing by 30 percent the price of spare-parts, because they were hopeful that import and other nuisance taxes would be scrapped.

However, reality is dawning that there is ‘no free lunch’ anywhere in the world, and that government also needs to consider generating revenue. The International Monetary Fund (IMF) says Ghana must legislate new measures to boost revenues by at least 0.5 percent of Gross Domestic Product (GDP).