Journalists for Business Advocacy (JBA) have noted with great concern government’s intention to further extend the application of the National Fiscal Stabilization Levy (NFSL) until the end of 2017. This planned extension of the Levy will further increase the financial difficulties of all the companies in the sectors on whom it is being applied.

01We wish to remind government that when the NFSL was reintroduced with effect from mid July 2013, the legislation backing its establishment, set its duration at 18 months. Therefore, the Levy should have been withdrawn at the end of 2014.

This is both unnecessary for government’s efforts at reducing its fiscal deficit to manageable proportions and is debilitating for the enterprises who are obliged to pay the Levy and who are already suffering from sharply rising business operating costs and falling effective customer purchasing power, which consequently are squeezing both their sales volumes and their net profit margins.

The reintroduction of NFSL in2003 was in response to a fiscal deficit incurred in 2012, but the deficit had been cut to 7.1% by 2015 and is now expected to fall further to 5.3% this year. This implies that the deficit is now falling to manageable proportions again and thus the Levy is no longer of critical importance to government’s fiscal balancing efforts.

JBA is acutely aware of the downside risks to government’s ongoing fiscal consolidation efforts in 2016, this being an election year, and having very little fiscal space to maneuver in. These challenges are exacerbated by the imperative need to keep within the targets set under the ongoing programme with the International Monetary Fund, including that of a 5.3% fiscal deficit target this year.

However we believe this needs to be weighed against the negative effects of the continued application of the NFSL on enterprises obliged to pay it.

It is instructive that several sectors where companies are obligated to pay the NFSL are experiencing downturns in profitability even as their working capital, recapitalization and retooling requirements continue to rise. For instance, mining support service companies are confronted with having to deal with customers whose profits have fallen dramatically because of the slump in gold prices on the global market; the banking industry is seeing its profits fall significantly due to rising loan repayment defaults due to the increasingly difficult business operating environment for their customers; and telecom companies are having to absorb steeply rising operating costs in cedi terms in order to retain market share in a ferociously competitive environment which is however benefiting customers in the form of tariff stability.

JBA wishes to suggest the policy option of replacing NFSL with a marginal increase in consumer taxes, which would itself be temporary.

Government projects to earn GHc213.11 million from the NFSL in 2016, which is equivalent to just 1.9% of the GHc11,323.878 million expected from consumption taxes in the form of excise tax, VAT, and health insurance and energy levies. This means a 1% increase consumption tax revenues could replace the revenues foregone if the NFSL is not applied during the second half of this year.

Similarly, projected revenue from the NFSL in 2017, at GHc373.55 million is equivalent to just 2.9% of the GHc12,981.442 million expected from consumption taxes for the whole of  2017. This means a 3% increase in consumption tax revenues in 2017 would easily replace the foregone revenues in NFSL revenues for the whole of next year.

We believe this would be a much fairer alternative since consumption taxes are paid by all, the amounts paid commensurate with consumption levels, which in turn are determined primarily by income levels.

This would help restore Ghana’s faltering competitiveness as an investment destination, which, the JBA, insists is crucial to the country’s economic growth prospects and therefore it ability to create jobs and incomes for its citizens going forward.

Note to Editor

JBA is a media advocacy group for small and medium scale enterprises in the country. JBA provides a potent platform for journalists to remain committed to promoting the SMEs sector as the media’s contribution to raising standards in industrial growth; employment generation; revenue mobilization and poverty alleviation. Established in 2008 and affiliated to the Ghana Journalists Association, our membership span across the country.


Mr. Suleiman Mustapha




Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.