When Finance Minister, Ken Ofori-Atta, read the Akufo-Addo regime’s first Budget, the 2017 Budget and Economic Policy, in March, one of the highlights was the scrapping of some 11 taxes, which the government had claimed as a mark of bold competence.
Among these 11 excises which Mr. Ofori-Atta had dismissed as “Nuisance Taxes,” was a 17.5% VAT on medicine imported from abroad.
Ghanaians are now struggling to understand why the very government which scrapped this tax on imported medicine as a “nuisance” is now turning round to ban the same pharmaceutical imports.
In the wake of the banning of the importation of a list of 49 medicines, the Akufo-Addo government is claiming that the outlaw is aimed at protecting local pharmaceutical manufacturers.
But questions have arisen as to why the government would scrap taxes on imported medicine in March, only to turn round and ban 49 of such medicines in May, when the taxes it scrapped had been naturally protectionist.
The erstwhile Mahama Government had imposed the 17.5% tax on imported medicine to very strategic effect – while making importation of such medicine unattractive as a protectionist measure, the government had also creamed up revenue for the national kitty.
But probably, most sagacious of all, President Mahama had applied the 17.5% VAT as a masterstroke with diplomatic bearing since even though the tax dissuaded importation from multilateral trading partners; it did not rock diplomatic ties the way a ban does.
As the Akufo-Addo government pigheadedly outlaws these pharmaceutical imports, a possible reprisal on the part of the countries affected – mostly China and India – could be to the total disadvantage of Ghana.
As of 2015, trade volumes between Ghana and China stood at $6.6 billion. In 2016, the trade volume with India was some $3.6billion. With the size of Ghana’s economy estimated at just a little over $40billion, it does not seem to be very wise to rock the boat of trade partnerships that account for almost $11billion.
More so, the ban is happening at a time that local pharmaceutical manufacturers are really facing constraints that might make it difficult for them to cover a huge supply vacuum that is created by the ban. Prior to the ban, the local pharmaceutical manufacturers accounted for only 30 of the drugs in supply, and, even then, it had been difficult to keep up supply because of the non-payment by government for supplies to the National Health Insurance Scheme (NHIS).
Chief Executive Officer of the Pharmaceutical Manufacturers Association of Ghana (PMAG), Anthony Ameka, while welcoming the recent ban by government, had been very quick to add that the non-payment for supplies to the NHIS is already crippling local pharmaceutical manufacturers.
At the moment, the NHIA owes local manufacturers some GHc1.2billion, a debt that had resulted when the local manufacturers were only supplying 30% of the banned pharmaceutical importations to the NHIS. It is while that debt is still outstanding that the government has given a hundred percent of supply responsibilities to these local manufacturers, through the ban.
Meanwhile, impression being created that the Akufo-Addo government, by this confusing u-turn, from scrapping dissuasive taxes on imported pharmaceuticals to banning the same pharmaceuticals, is being more protective of local manufacturers than the Mahama regime’s, rather stands out as the alternative fact.
The erstwhile Mahama regime had made very deliberate policies to help the local manufacturers to be more competitive, by combining taxation with funding.
In 2016, while the 17.5% VAT was on imported pharmaceuticals, President Mahama had announced a policy to broaden government’s direct capital support for local pharmaceutical manufacturers.
In line with this, the former President had directed the Export, Trade, Agricultural and Industrial Development Fund (EDAF) to make available $45million to local pharmaceutical manufacturers.