Problem of VAT on pharmaceutical raw materials unresolved

Accra (Greater Accra) 14 Jan. '99

The problem surrounding the payment of Value Added Tax (VAT) on imported raw materials to manufacture drugs remains unresolved. Under the VAT law, while local pharmaceutical companies pay VAT on raw materials they import for production, companies which import finished drugs do not pay VAT. This has brought about the situation where imported pharmaceutical products have turned out to be cheaper than locally produced ones, a pharmacist said in Accra today. "This brings the price of locally manufactured drugs to nearly two times or three times higher than the price of imported ones". Inquiries by GNA at the Ministry of Trade and Industry and the VAT Service revealed that the situation will not change until Parliament debates the issue and comes out with a desirable proposition on how local pharmaceutical companies can operate under the new tax system and not face shutdowns. Mr Ezekiel Asamoah, Director of the VAT Service, said "there are a few things that must be resolved before we will know whether to stop taxing them or not." "As the situation stands now, local pharmaceutical companies are still paying taxes just as they were doing under the old tax system," he said. Officials of the Association of Ghana Industries (AGI) described the situation as bad saying it has the potential of not only worsening the plight of already distressed local pharmaceutical companies, but the entire local manufacturing industry. They said the liberalisation of the Ghanaian economy has brought in its wake the crippling of all manner of industries ranging from the established and viable to the young and viable adding that this is not good for the economy. They expressed regret that although they pointed out the problem to the Ministry of Finance, VAT office, Parliament and other relevant bodies as far back as 1995, no attention was paid to it.