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08.11.2005 Business & Finance

AGI calls for reduction in corporate tax

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Accra, Nov. 8, GNA - The Association of Ghana Industries (AGI) has appealed to the Government to reduce corporate taxes in the light of the implied role of the manufacturing sector in the Ghana Poverty Reduction Strategy II, with regard to employment and incomes reduction and the attendant reduction in the incidence of poverty.

The AGI, in its proposals to the Government to be incorporated into he 2006 Budget, said the maximum corporate tax levels for manufacturing should be reduced to 25 per cent effective the 2005 accounting period from 28 per cent.

According to the proposals submitted to the GNA, small and medium size manufacturing start-ups should be given a five-year exemption from corporate tax.

It said carry-forward of losses should be extended to all manufacturing activities after the tax holiday period. On withholding tax, the AGI asked for the introduction of discriminatory rates of 2.5 per cent for manufacturing and five per cent for others.

AGI commended the Government for the deferment of VAT payment on imported raw materials.

However, it said, some manufacturing operations were still to be considered for this concession and, therefore, urged the Government to address these concerns and extend the concession to the pharmaceutical industry, manufacturing concerns using significant quantities of domestic raw materials that were not VAT exempt and the printing industry.

"The time has come for the Government to seriously consider granting significant relief to domestic industry as part of measures to assist them enhance their operations and competitiveness prior to the coming into force of the ACP-EU economic partnership agreement in 2008. AGI said one such measure would be the removal of import duties on imported raw materials, which were not available in Ghana. It said the Government should reconsider raising the tariffs on poultry products and rice imports to not less than 50 per cent of the Ghana bound rates.

Government should also revisit the proposed Domestic Content Bill and reassess its relevance to boosting domestic manufacturing within a phased period of five years.

AGI noted that the non-availability of certain critical data or statistics created problems for policy research and analysis especially the aggregate expenditure component of GDP.

It, therefore, urged the Government to resource the Ghana Statistical Service to start capturing the relevant statistics that would enhance the analysis of policies by Government. The AGI said the Government should as a matter of priority adopt a checklist approach to address all difficulties over the period of implementation of the GPRS II.

However, those of high priority such as relating to finance, information flows, administrative hurdles and governance should be tackled as a matter of urgency.

It noted that the attainment of the completion point of the Highly Indebted Poor Countries (HIPC) Initiative and the submission to the African Peer Review Mechanism bestowed on Ghana special benefits, which had to be utilised fully.

The Government should use a higher proportion of these funds to reduce its domestic debt in order to bring in further the private sector.

"The Government may also have to set up an oversight committee to ensure the utilisation of the inflows and to monitor and evaluate the progress of effective disbursement of the funds."

The AGI urged the Central Bank to use all the policy instruments that would promote competition in order to achieve a higher level of financial intermediation, saying the current situation where only about four banks controlled about 50 per cent of the financial sector was not conducive for competition.

"To achieve growth rates ranging between 5.9 per cent and 6.4 per cent per annum, investment as proportion of GDP should range between 25.2 per cent and 27.12 per cent of GDP.

"The Ghana Investment Promotion Council and the government at large should set up an effective monitoring and evaluation system in place to monitor the various projects and programmes to attain the needed level of quality investment."

AGI said in order to achieve the Golden Age of Business and Industry; the growth targets in the macro-economic programme should be reconsidered.

"To guarantee the reduction in poverty rates, while at the same time integrating the economy into the global system, requires special focus on the industrial sector to register double digit growth rates."