Sunday, 24 November 2019

Extension of the National Fiscal Stabilisation Levy unfortunate


Image result for Abdallah Ali-Nakyea 


Adnan Adams Mohammed

The government has extended the National Fiscal Stabilization levy for another five years; starting from next year to 2025.

The Finance Minister, Ken Ofori-Atta is currently seeking approval to have the National Fiscal Stabilisation Levy (NFSL) and Special Import Levy (SIL) extended for another five years from 2020 to 2025.

The National Fiscal Stabilisation Levy (NFSL) introduced in 2009, as a temporary measure to help mobilise revenue to stabilise of the economy from the fiscal slippages it suffered at the time, scrapped two years later, only to be reintroduced in 2013 to run for 18 months.

But a tax expert, Abdallah Ali-Nakyea sees the extension as unfortunate. “Unfortunately, as we have seen there is another extension and this time for 5 years to end in 2024.”

“This adds to the cost of doing business as it is a levy and thus not an allowable deduction for tax purposes although it is taken upfront”, he explained.

In reading the 2018 budget, the Finance Minister assured the business community that the government will scrap the national fiscal stabilisation (NFS) levy in 2019 after extending it beyond the original dateline of December 2017.

Given that the levy has since become a major part of government revenue mobilization in spite of its debilitating effect on the private sector, many businesses have always expressed worry over the commitment to permanently withdraw it.

While admitting the lukewarm attitude towards removing the tax, MrOfori-Atta said his outfit was committed to ending it in 2019.

He was optimistic that revenue enhancement measures announced in the 2018 budget would yield the necessary results to help make-up for the loopholes that the NFS levy is envisaged to plug. The levy is a five percent tax on the pre-tax profits of businesses.

It has however remained, prompting businesses to push for it to be scrapped. Although a sunset clause in the act that reintroduced it allowed for it to be removed in December this year, the 2018 budget announced that it will be extended until December 2019.

Meanwhile, the Member of Parliament (MP) for Tamale North, Alhassan Suhuyini has attributed some of the current economic struggles to what he said were the New Patriotic Party (NPP) government’s mismanagement of the National Fiscal Stabilization Levy.

“The stabilization levy that was introduced to regulate the market to the advantage of the consumer. This government has mismanaged that levy; the application of that levy, and I think that is why we have this problem,” the MP said.

Mr. Suhuyini recalled that at some point, the levy was to aid in storing up strategic fuel stock.

“Farm tanks were supposed to have been constructed around the country so that as we enjoy that windfall at the time, we would have some stock available for times like this. But this government has mismanaged and misapplied that levy that today, it has no impact on the consumer,” the former broadcaster stated and further maintained that, the NPP “has no excuse than to make life better.”

This is because conditions are better than when the NDC was struggling with power crisis and rising fuel prices on the world market.

The levy is paid by financial institutions, insurance companies, as well as companies, providing mining support services to support the economy to put government’s fiscal plans on the right footing in light of negative externalities.

Per the law that introduced the NFSL, a sunset clause stated for it to be scrapped in 2015, but was extended for another 2 years and was expected to lapse in 2017. However, according to the government, due to its commitment to key social programs, it decided to extend it again for another 2 years to expire in 2019.

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