The Association of Ghana Industries (AGI) has called on the government to give tax breaks to investors interested in the ‘One District, One Factory’, especially those looking at the rural areas.
Humphrey Ayim-Darke, Vice President of the Association in charge of SMEs, believes that for the ‘One District, One Factory’ to succeed, the government must completely waive corporate taxes while employing a tax policy like the Pay-As-You-Earn (PAYE) to lure investors, entrepreneurs and industrialists to establish these companies or factories.
“For the One District, One Factory, we are of the opinion that to motivate industrialists, entrepreneurs to go out there and establish factories what other benefits are you giving them? Scrap corporate tax,” he said.
Asking what government has got to lose, Mr Ayim-Darke noted that these companies are not in existence and so the government is not making any money out of corporate tax.
“What you need now is job creation. Waive corporate tax and make use of Pay-As-You-Earn (PAYE) and other forms of indirect taxes and expand to create jobs,” he told the B&FT in an interview at the KPMG-organised budget forum which came off in Accra.
The Ghana Revenue Authority (GRA) has waived as well as reduced taxes aimed at luring investors, especially foreign ones, to certain parts of the country, with a special focus on the three northern regions.
While some enjoy a tax-free status, others enjoy tax holidays for up to 10 years. After the initial five-year tax holiday period, agro-processing enterprises which use local agricultural raw materials as their main inputs shall have corporate tax rates fixed according to their location with those situated in outside the regional capitals, and the Northern, Upper East and West regions paying no tax at all.
The Free Zones Act 504 provides tax holiday of 10 years for companies operating in areas demarcated as Free Zones. Thereafter corporate tax is paid at the rate, not above 8percent.
But Mr Ayim-Darke noted that as an industrialist himself, it is difficult trying to reclaim or seek tax refunds and that is why he is calling for the total removal of corporate tax for investors in the government signature promise of ‘One District, One Factory’.
“We are of the opinion that encouraging entrepreneurs to go to districts, the government must scrap the corporate tax on every ‘One District, One Factory’ wherever the factory is located. What is the motive? Creating jobs,” he said.
Emmanuel Asiedu, Partner and Head of Tax at KPMG also supported the view that government must waive corporate tax and other taxes for investors who are interested in the ‘One District, One Factory’, especially for those moving into the districts that are not in urban areas.
“I do support that because look at the advantage they [investors] have in the cities: electricity water, roads and others; they will not have those things in the rural areas so you need to give them a compensation for those things,” he said.
Mr Asiedu noted that even though some tax breaks and reliefs are available, the government must synchronise the entire system because the tax cuts do not apply to every sector of the economy.