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New Tax Laws Are Business Unfriendly   
 
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11-Jul-2013  
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The Private Enterprises Federation (PEF) has criticized Parliament’s passage of a number of bills into law recently without any consultation with the private sector under certificate of urgency.

In a commentary on some of the laws including the National Fiscal Stabilization Levy, Communications Service Tax, Special Import Levy, Customs & Excise Amendment, it said the new tax hikes will effectively increase the corporate tax rate for businesses and seriously reduce the ability of businesses to raise internally generated income for expansion.

In May 2013, the Government put forward a proposal to impose short-term additional tax on the profit of businesses as fiscal stabilization levy.

It would be recalled that similar levies were imposed in 2001 and 2009: the National Reconstruction Levy under Act 619 on financial institutions, mining, telecommunication, brewery and major manufacturing companies, and the National Fiscal Stabilization Levy under Act 785 on breweries, communication and mining companies.

These levies were later abolished following complaints from the private sector.

After an emergency meeting of PEF’s Governing Council on Monday, it resolved that “the levies will increase the cost of doing business and negatively affect the operations of businesses, as they reduce the amount of returns to finance business expansion and create jobs.”

PEF said, “However, the Governing Council’s position is that over-taxing a few select industries is not a sustainable way by Government to meet its revenue shortfall. What Government needs to do in our view is to ensure that every economic agent, irrespective of size, pays its fair share of taxes.

“Government, as a matter of urgency, should review the various tax exemptions and free zone tax holidays that have been granted over the years, some of which may have since expired to ascertain compliance, relevance and efficacy.”

According to PEF, several studies have concluded that high taxes on business in the long-term result in shrinkage of the economy, less investment, fewer jobs and lower wages, and ironically, lower tax revenues to government.

It added that such reductions have been estimated to outweigh the additional benefits as a result of increased government spending financed by the higher taxes.

“Government should prioritize its expenditure and only undertake projects that are critical for the growth of the economy at this period where its finances are in critical short supply. Government cannot and should not continue to embark on projects basically because they have been approved in the Budget. It cannot continue to tax and spend. This is a period of critical shortfalls where economic gains accrued over the years may unravel if we continue on this incessant tax hikes.”

Businesses in the country, it noted, are feeling a dramatic financial crunch as a consequence of continuous power outage, water shortages and high cost of funds, among other constraints, adding that these have started to affect their ability to keep current employment levels.
 
 
Source: Samuel Boadi/D-Guide
 
 

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