Ghana’s Parliament approves 2.5% hike in Value Added Tax
Despite the Minority in Parliament staging a walkout on Friday to protest a 2.5 percent increment on the Value Added Tax (VAT), the House gave accent to the Value Added Tax (Amendment) Bill, upping the VAT rate from 12.5 percent to 15 percent.
The Minority expressed misgivings about the way the increment was “surreptitiously” introduced into a bill under consideration without debate on its cause and effects on the economy and the people.
As soon as a Deputy Finance Minister, Cassiel Ato Forson, rose to make an amendment seeking to impose a 2.5 percent increment on the VAT, the House was immediately thrown into chaos, as the minority vehemently protested the move, citing lack of consultation on the issue before bringing it to the floor of the House.
First Deputy Speaker, Ebo Barton Odro was at pains trying to control the temper tantrums that were thrown from both sides of the House. And the Minority walked out to register their displeasure at the lack of debate and discussion on the increment.
But Ato Forson explained to the House that since the VAT was a broad based tax, government, by the increment, will be able raise an additional yearly amount of GHc745 million that would be devoted to capital development portion of the 2014 budget.
He said that from 2015, the amount to be accrued from the increment would be put into a national infrastructural development fund that would finance all investment projects like roads, schools etc
The Deputy Minister said because of the pressures imposed on the budget by the Single Spine Salary Structure, there was little space to undertake major infrastructural development, thus government had to find a better way of solving the infrastructural challenges besetting the country.
He said that VAT will not be the only source of raising revenue for infrastructure but the 2014 budget will address the issue, adding that, the move was done with good intentions.
Mr Ato Forson also noted that since Ghana became a middle income country, access to concessional financing, aid and grants was almost drying up and that this called for a balance between loans and internal generated funds
“This is the time that we have to go for a tax that will make that impact and we are promising that this tax will not go into consumption but target mainly capital expenditure”.
He stated that even after the amendment, Ghana still remained the lowest in the VAT tax bracket, citing neighboring countries like Burkina Faso, who were not so economically viable like Ghana but had a VAT rate of 18 percent.
“VAT has become like a Ghost haunting us…It is important that we are bold to confront this matter and deal with it once and for all.”
Source: GNA