The government is convinced that paper stamps on excisable products are the best solution to revenue leakages after estimates showed that its implementation can cause excise duties to rise by 20 per cent to 25 per cent in the first year.
The expected increment in revenue was arrived at after a survey found that close to 25 per cent of excisable goods escaped the tax net.
To help counter the smuggling and get all businesses to pay excise, the Chairman of the Tax Stamp Implementation Committee, Mr Samuel Akwasi Yankyera, said the government had now resolved to enforce the Excise Tax Stamp (2013), Act 873, which had been idle for more than four years.
The decision is now conclusive and can only be reviewed, “looking at the state of implementation,” Mr Yankyera told the GRAPHIC BUSINESS on February 23.
He added that primary estimates already show that strict enforcement of the Act from March 1, as planned, could lead to revenue increment from excise duties by some GH¢200 million in the next seven months.
The extra GH¢200 million from excise duties was factored into the government’s 2018 revenue estimates which pegged total revenue, including grants at GH¢51.04 billion, Mr Yankyera, a former Deputy Commissioner of Customs in charge of Operations at the Ghana Revenue Authority (GRA), said.
“The situation now is fluid but we did scenarios where we expect that at least, the increase in revenue from that particular policy will be more than 20 per cent to 25 per cent. It can even go up to 50 per cent.
“The reason is that if you talk about smuggling, these are goods that you do not see and so we based our projections on anecdotal evidence and expect that somehow, may be, for this year alone, we will get something around GH¢200 million,” he said.
Since January this year, affected businesses, led by their associations, have been protesting the enforcement of the Act which requires manufacturers and importers of cigarettes and other tobacco products, canned and bottled beverage and water to affix GRA-approved stamps on their products before they are allowed into the market for sale.
Failure to affix the stamps renders the products illegal and the buyer, seller, distributor, importer or manufacturer will be liable to prosecution.
“A product in the market with the stamps is a prima facie case that you have not paid tax on them,” Mr Yankyera of the Implementation Committee said.
He said some manufactures and importers, including the GIHOC Distilleries and the Distell Ghana Limited, had already affixed the stamps on their products ahead of the March 1 enforcement date.
Given that the enforcement places a financial burden on importers and manufacturer, the Executive Secretary of the Food and Beverage Association, Mr Samuel Aggrey, said affected businesses will be better off if the government replaced the upcoming paper stamps with electronic embossments.
The electronic stamping will keep production lines on the normal speeds, eliminate initial investments and maintenance costs associated with the procurement of the stamp affixing machines and lead to a smooth implementation, he told the paper in an earlier interview.
He later said at a press conference that members of the association would not hesitate to withdraw their products from the market and shut down production lines if the government went ahead to enforce the Act come March 1.
He said the enforcement would be smoother if the government targeted imported hard liquor and tobacco products before enlarging it to cover other products.
His concerns were shared by other business associations including the Ghana Institute of Freight Forwarders (GIIF), the Ghana Union of Traders Association (GUTA), the Importers and Exporters Association and the Association of Ghana Industries (AGI), who argue that the country would be better off if the enforcement date was rescheduled to allow for better dialogue.
Impact on budget targets
Mr Yankyera said these concerns, although genuine, had been anticipated, with necessary strategies in place to address them.
“We just did not get to say we are introducing tax stamps. It is based our observation, it is based on what we see and we felt that this is an effective method of addressing the concerns raised,” he said.
When asked what the agitations meant to the revenue projections, the chairman said “yes, it was factored in that we will get some amount but looking at the way things are going, there may be some review, looking at the state of implementation.
“Definitely, if it comes, we will be able to plug some loopholes and the GRA may be able to achieve its target,” he said.
In the 2018 budget, the authority is tasked to collect GH¢39 billion about 14.7 per cent above the 2017 target of GH¢34 billion.
The anticipated increment was to be driven proposed tax policy measures such as the review of the suspense regimes and implementation of the Excise Tax Stamp policy, the budget said.
A tax expert, who spoke in confidence, said the foregoing agitations risks delaying the enforcement of the Act, which could, intend, affect revenue collections.
“If the government is unable to do and do it as soon as possible yet the estimates in the budget were done properly, then of course, there is going to be a higher deficit coming this year again,” the source said.
As of November last year, total revenue and grants were reported at GH¢34.9 billion compared to a budget target of GH¢38.4 billion.