The prices of some locally produced goods will start to skyrocket come 2012 as the government has added more tax on domestically produced goods, something that will surely reflect on the final prices paid for these goods by consumers, whose earnings rarely increase.
As part of measures to remedy the declining revenue performance of the government, the Ministry of Finance and Economic Affairs has announced that come 2012 it will widen the tax base in order to reverse the current decline in revenue and also reduce the swelling deficit of the country to the target that will allow sustainable growth in the economy.
|Mambury Njie, Gambia's Minister of Finance|
“This will certainly increase the cost on local producers,” said Abdoulie Baks Touray, an economist and financial analyst, who spoke to Marketplace Magazine shortly after the minister delivered the budget speech at the National Assembly on 17 December 2011.
Excise tax was zero rated to encourage the country’s infant industries to produce more at a cheaper cost and be competitive. The re-introduction of excise tax will mean an additional cost on local producers, which will be considered in determining the final prices of goods.
Mr Touray said that for producers, the introduction of excise tax will “be a pass through” factor because certainly the producers will pass on the tax charges unto the consumers who will pay for it through purchasing the goods.
Already, the local manufacturers are crying down the number of taxes imposed on them saying the country’s different shades of taxation is enough to put them out of business.
“We are paying so many taxes,” said Saja Sambou of Gambega, a local soft drink bottling firm. Mr Sambou pointed out that manufacturers in the country are faced with many different types of taxes, a big challenge local manufactures are grappling with.
According to Mr Touray, local producers should look at ways of reducing their cost from other areas. “They should start looking at export markets in terms of how they can expand their export base so that they can produce more at a lesser cost,” he said.
The economic think-tank noted that local producers should take advantage of the ECOWAS market, which is a market of 700 million people, so that their unit cost in terms of economies of scale becomes much smaller and they will therefore not feel the impact of the excise tax.
Under the ECOWAS protocol, there is the ECOWAS Trade Liberation Scheme (ETLS), which allows producers and manufacturers within ECOWAS member states to export to all the markets in West Africa and have a bigger catchment.
“If the Gambian producers take advantage of this, then they can have a bigger market and produce more for less,” Mr Touray said.
Expansion of the excise tax on domestic producers is part of measures taken by the government to increase tax revenue, which has been declining constantly over the past three years, resulting in less than desirable implementation of the government’s development objectives.
The country’s fiscal performance has continued to be challenged by higher-than-projected expenditures by the government that is un-matched by the country’s revenue performance.
Cement and sugar prices to hike
Again, as part of measures to remedy the downward revenue performance of the country, the government has also planned to remove the protection on sugar and cement on the premise that the protection has not made any difference in the market price.
The removal of the protection given to dealers of sugar and cement may see the prices of these commodities further increased.
Special investment certificate holders to start paying tax
Again, the revenue measure has also touched on some categories of investors as the government has said holders of Special Investment Certificate (SIC) whose certificates have expired should start to pay tax.
“We are not going to accept any renewal, I think we have been renewing for a long time and now they should be paying tax as this is the reality of the day,” said finance minister Mambury Njie.
Investors who invest in areas identified by the government as priority areas are given Special Investment Certificate, which gives the holder a special incentive package for a period of five years.
The priority areas include agriculture, forestry and fisheries, manufacturing, skills development, communication, energy mineral exploitation, and information technology.
The people who have invested in these areas are given the SIC after fulfilling the criteria. With the special certificate, holders are exempt from withholding tax and tax on dividends, exempt from customs duties on some capital equipment, exempt from sales tax on some of the capital goods, and also exempt from the turnover tax. With this decision, holders of the SIC whose certificates have expired will no longer enjoy all these exemption.