Domestic manufacturers, led by the Association of Ghana Industries (AGI), have called for an overhaul of the tax exemption regime to help prevent it from further deepening the woes of their businesses.
In its present form, the manufacturers say the regime was discriminatory and combines seamlessly with the various trade malpractices at the ports to encourage exempted companies to import to the detriment of the domestic businesses.
Speaking in an interview on behalf of AGI on how cheap imports and trade malpractices are impacting negatively on industrialisation, the Business Development Manager of Nexas Kablemetal Ghana Limited, Mr Kingsley Letsa, said the loose nature of the tax exemption regime was making matters worse for member companies and the economy in general.
“I am paying duties on raw materials but the mines can import products without paying duties because they are exempted. So, why should they (the mines) buy from me,” Mr Letsa asked in an interview on February 15.
“If government wants us to be able to grow, they must come again with the duties exemption for raw materials,” he said, pointing to the annual decline in the growth of the manufacturing subsector as the implication a discriminatory tax exemption regime.
Give us ear
Since 2010, data from the Ghana Statistical Service show that growth in manufacturing has been on the decline. From a rate of 10.2 percent in 2010, growth has weakened consistently to 4.6 percent in 2016 and now estimated at 3.1 percent in 2017, the lowest in more than a decade.
Mr Letsa said the AGI believed the growth trend was evidence of the gradual marginalisation of industry in favour of importation.
“We need the government to give us an ear and begin to understand that whatever ambition we have for this economy will not happen if we focus more on imports,” he said.
To help reverse the trend and create opportunities for domestic manufacturers, Mr Letsa said the government could introduce a new measure that would discourage exempted companies from importing items that are produced locally.
Once that is done, he said exempted companies or contractors can then be compelled to buy from domestic manufacturers under a special arrangement that will still waive the duties. This would create a market for local manufacturers, stimulate growth and create jobs for the teeming youth, he said.
On the recent reports that the industry sector grew by 17.7 per cent in 2017, Mr Letsa said it was deceptive, as the rate was driven by oil and not the non-oil sector, which encompasses the real economy and a bulk of AGI’s members.
“When you talk to any industrialist, he/she will open the mouth that where was the growth,” he said.
“It is okay to publish such figures to help attract foreign investments but the truth of the matter is we cannot move from negative three per cent in 2016 to 17.7 per cent without seeing a commensurate growth in industry.
“I do not know how many companies employed more, increased warehouses or put up more buildings. So, if you talk of growth in the industry, you have to look at the non-oil sector because that is our place,” he added.
The AGI has been raising concern on how some importers have found “cunning ways to evade taxes and duties through the connivance of some revenue officials at the Tema Port. Mr Letsa told the DailyGraphic that the practice was rife in the cable business, where Nexas Kablemetal has been operating since 1970.
“The fact is that a lot of people don’t declare the actual cost. There are instances where people import and then ask the foreign manufacturer to give them invoice less than the price and that are what they declare at the port,” he said.
He said although cost of production of cable was almost the same throughout the world, some importers were still able to sell cables at 40 per cent less the price of those produced locally.
“What it means is that they are actually buying substandard copper or avoiding paying taxes at the ports and that is impacting on their prices,” he said.