Imani Ghana, a local economic think tank, has warned the government to have a second look at its tax policies to save the economy from collapse.
According to the think tank, the industrial sector in Ghana has for many years withstood many shocks and survived many hard times, but in recent years, a combination of very adverse conditions have made things very difficult for industries in Ghana.
"Over the past few years, some companies like PZ and BAT have closed down their manufacturing plants and moved to Nigeria, choosing rather to import their finished goods into Ghana. Others are considering moving out too.
"Those who believe a change is in the distant offing have their fate sealed; taking extremely risky measures to survive in order not to lay poor Ghanaian workers off," the President of Imani, Franklin Cudjoe, noted in a statement and follow up interview with The Chronicle.
According to the Imani President, who recently met with industry players to discuss the impact of the economy on their businesses, the constant increase of taxes without consultation was impacting negatively on business concerns in the country.
He alleged that one of the local district assemblies recently increased taxes paid by a telecommunications company by 500%, explaining that the company was the only one in that district.
According to him, the local authorities are also treating cell sites as business operating premises, instead of infrastructure and taxing them.
The John Dramani Mahama government recently introduced a series of taxes to help plug the hole in the economy.
In 2011, Ghana's economy was adjudged one of the fastest growing economies in the world, after recording a growth rate of 14%.
The success story could, however, not be sustained in 2012, resulting in a budget deficit of $8.8 billion. The government, however, attributed the development to the full implementation of the Single Spine Salary Structure, which shot the public sector wage bill paid to less than 500,000 workers, from GH¢1.4 billion in 2007 to a staggering GH¢8.8 billion last year. The figure represents 73% of the total revenue that accrued to the government in a fiscal year.
Other factors were attributed to fuel subsidies. For instance, at the beginning of 2012, the government budgeted to spend US$470 million on fuel subsidies, which is 0.7% of Gross Domestic Product (GDP). The subsidy was, however, overshot by $339 million, which is 0.4% of GDP, by increasing the overall expenditures to $809 million.
The fear of election violence also compelled many investors to convert their equities into dollar currency and transfer them out of the country. This, coupled with the massive domestic borrowing by the government, also put severe pressure on the exchange rate, and the concomitant increase in goods and services in the country.
The above unbudgeted expenditures hit the 2012 budget after its approval, resulting in the building up of arrears. This led to the huge deficit of $8.8 million, which represents 11.8% of the GDP.
To help address the situation, the government, in its 2013 economic policy, introduced new taxes to help raise enough revenue to balance the high public sector wage bill.
Expenditures in the key sectors of the economy were also cut to help in the realisation of funds to tackle other projects that had already been initiated. The 2013 Budget also promised to cut the budget deficit from 11.8% to 9%, in addition to the economic growth of 8% of the GDP.
At recent review of the economy held at the Peduase Lodge in the Eastern Region, the Finance Minister, Seth Terkper, said the government was positive about the growth prospects of the economy, because of the various economic measures it was implementing.
According to him, services and the agricultural sectors had already recorded positive growth, and the government believes that with the easing of the power crisis, the performance of the two sectors will improve.
But, Imani thinks some of the austerity measures, including the new taxation, were having a great toll on the large companies operating in the economy, despite the positive picture painted by the government.
"It is common knowledge that there is a huge informal sector whose operations are below government's radar. Some of these so called informal sector operators have turnovers of $5 m (five million dollars).
"It is clear to industrialists who have above-board operations that these informal operators are competing them off the market, able to dodge taxes, levies and other payments, because they remain informal and under the radar, in spite of the fact that their goods are clearly on the market and they can be identified if the authorities wished," Imani noted.
Quoting a business executive he did not name, Franklin Cudjoe noted that due to corruption at the ports, some of the industry players were paying about 70% less duty than others. This, he noted, had made some of the companies which are not prepared to pay bribes uncompetitive in the market.
"Such laxity in the application of business laws, however draconian, leaves a feeling among industrialists that some of these informal businesses were operating with tacit support of some public officials. Ultimately, these acts of omission and commission make it difficult for honest businesses to succeed," he added.
Imani also believes that Ghanaian business leaders are smart and intelligent, and are willing to help deal with Ghana's many economic challenges, if they are seen as real partners, instead of cash cows. "We also believe there is sufficient, but largely untapped, goodwill on the part of managers of the economy.
"Therefore, as urgency stares us in the face to address the crumbling pillars of our economy, business leaders and the government, the supreme court verdict, whichever way it goes, must cause a deliberate shift in the posture towards business in courting industry in particular to improve the economy, in order to positively affect indicators such as unemployment, the falling Cedi and general confidence in the economy."