Implementation of 3% VAT Flat Rate might lead to massive job cuts

Some manufacturers are contemplating possible job cuts with the continuous implementation of the 3 percent VAT Flat rate scheme.

The businesses say the tax is affecting their profit margins hence the decision to reduce the labour sizes to stay relevant in business.

The options of job cuts is among the concerns raised by some manufacturers at an education seminar on the 3% VAT Flat rate by the American Chamber of Commerce on last week.

Describing the thoughts as worrying, the Executive Secretary of the American Chamber of Commerce, Simon Madjie explained the need for government to meet up with all key business associations and identify the way forward in addressing the issue holistically.

“This affects the profit line of businesses in many ways so if someone’s margin is 5 percent and he or she would have to look at 3 percent, that is quite significant but if another person’s profit is 45 percent and would have to look at 3 percent, then the person could absorb it,” Mr. Madjie asserted.

“So if you think that the new tax rate will affect your profit significantly then you look at ways to remain profitable and it involves cutting jobs, it’s a possible end to all these things,” he again noted.

Government is yet to make any concrete decision on the concerns by the various business associations on how the new tax is impacting their operations.

The Association of Ghana Industries (AGI), Importers& Exporters Association, Food and Beverage Manufacturers Association of Ghana are among the businesses that have mounted strong opposition to the 3 percent VAT flat rate.

Some of the businesses have since increased their prices to reflect the rising cost of production.

But the Ghana Union of Traders Association (GUTA) has backed the move saying that it will afford its members the ease of calculating their tax and account for the m accordingly.

Meanwhile Mr. Simon Madjie explains to Citi Business News their members will lay off workers when the high costs become unbearable.

“So we actually hope that government sits down and look at the businesses’ concerns especially manufacturers in this situation.”

 

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