Common External Tariff to harmonise ECOWAS tax regime
Mr. George Blankson, Commissioner-General of the Ghana Revenue Authority says the Common External Tariff (CET) which became operational in the country on 1st February 2016, is expected to bring Ghana in harmony with other ECOWAS countries in the imposition of tariffs among traders.
The implementation of the CET is expected to be an effective instrument for harmonising the import policies of member-states, which will guarantee and strengthen the framework for realisation of a common market.
Mr. Blankson speaking at a media interaction in Accra explained that although the tariff system has got many importers worried about increased taxes, CET is a tax harmonisation system across the West African Sub-Region.
“The way it works is that to ensure harmony taxes on some imports have been reduced while others have gone up so those who import goods on which taxes have gone up are the ones complaining but those importing goods on which taxes have gone down are quiet.
“The CET regime means that the same tariffs will be slapped on an eligible item imported into the ECOWAS region, irrespective of which member-country it first lands in.”
Dr. Edward Larbi-Siaw, Tax Policy Advisor at the Ministry of Finance and Economic Planning, in a recent engagement urged Ghanaian business community to embrace the ECOWAS Common External Tariffs to expand their business.
He said CET allow industries to expand to take over from other businesses and urged the business community not to be afraid to take such opportunities adding that it is the tariff is one of the instruments of harmonising ECOWAS Member States and strengthening its Common Market.
Dr Larbi-Siaw therefore urged the public to embrace the policy instead of trying to fight it from a position that was unattainable.
CET’s implementation in addition to having the same customs duties, the countries may have other common trade policies: such as having the same quotas, preferences or other non-tariff trade regulations apply to all goods entering the area, regardless of which country, within the area they are entering.
Under the regime, Ghana’s four-band tariff system will expand to become five bands; namely basic essential goods, primary raw materials/capital goods, intermediate goods, final consumer goods, and specified goods for economic development.
Ghana has already conducted an impact study on the incoming regime and found that with the implementation, its current four-band Customs regime currently has 6,057 commodity lines that are dutiable.
However, the coming into force of ECOWAS common tariffs for imports will simplify the commodity lines to 5,889 — but reduce the number of commodities admitted under zero percent tariff rates from 725 to 85.
At the same time, the scope of commodities admitted under the five percent band will be broadened from 375 to 2,146 under the CET. The tariff, set at 35 percent at most, is expected to modify the rights and obligations of ECOWAS member-countries under the CET.
Ghana was granted the possibility of adding a fifth band of 35 percent for finished goods manufactured locally under the new tariff regime that is expected to be reviewed. The common external tariff is a mild form of economic union but with potential of leading to further types of economic integration, which is in conformity with the larger Continental Free Trade Agreement.
The new CET for West African nations was launched in 2014 by heads of state and government of member-countries of ECOWAS. Considered a major step toward economic integration in the sub-region, the adoption of a common external tax regime was officially proposed to take effect from January this year within the region.
Industry watchers are of the opinion that the initiative may create a contradiction between the World Trade Organisation (WTO) commitments of individual countries and the requirements of the regional trade integration project essential for West Africa’s economic development; others insist that it is, indeed, a crucial milestone on the road to the creation of a Customs union for West Africa with far-reaching benefits.
A CET regime is considered a healthy development for the region: for example, under the scheme goods imported into a Francophone country, such as Republic of Benin, will not necessarily be cheaper or more expensive than those entering another Anglophone country such as Nigeria or Ghana.
The initiative will undoubtedly check the menace of smuggling by bringing to a near-end a development whereby goods bound for Ghanaian ports are diverted to Togo, from where they are later smuggled into Ghana.
In addition to the expected improvement in Customs revenue within the sub-region, it is also expected that key sectors of member-countries will get a fair measure of protection as the plan will boost national productivity through a remarkable reduction of Customs duties on items such as raw materials for industrial production.
An impact assessment of implementing the ECOWAS CET conducted by the Ministry of Finance (MoF) indicates that total revenue gain from implementing CET in 2015 is projected at GH?986million.
The additional revenue to government as a result of implementing the CET is estimated to be 1.4% of the total value of commodity imports in 2013. The report forecasts total imports to be GH¢48.99billion in 2015, with estimated revenue gain of GH¢686million. This represents over 3% of tax revenue increase.