Ghana Cracks Down on Trade Leakage: Government Takes Decisive Steps to Stem $5.5 Billion Annual Loss

The Ghanaian government is stepping on the accelerator by launching a series of initiatives aimed at boosting the economy and triggering a manufacturing boom. This multi-faceted approach addresses various obstacles, creating fertile ground for businesses to flourish and contribute to national wealth.

A crucial area of ​​focus is the simplification of the business environment. The administration understands the need to remove unnecessary barriers for manufacturers. Initiatives are underway to streamline regulations, cut red tape and speed up business registration. This not only benefits existing businesses but also attracts new investments, both domestically and internationally.

The government is actively working with various sub-units like the Ghana Revenue Authority (GRA) to ensure a fair and transparent business landscape. A good example of this is the recent destruction of seized illegal tobacco products. This decisive action by the GRA protects legitimate businesses by securing public revenue and dismantling unfair competition from contraband goods. Businesses that comply with regulations and contribute taxes can now operate on a level playing field.

The benefits go beyond fairness. By curbing illicit trade, the government is demonstrating its commitment to protecting its vital revenue streams, particularly at a time when revenue is needed to boost other sectors of the economy. By combating illicit trade, the government encourages local and foreign investment by improving the business climate and preserving revenues that could be diverted to finance illegal activities and benefit criminal networks.

By protecting legitimate investors, the increased revenue generated from their business operations can then be strategically reinvested into the economy, fueling growth in crucial areas such as infrastructure, education and health. This creates a virtuous cycle in which a thriving business environment generates revenue that strengthens the very foundations of future economic success.

The government’s commitment goes beyond regulatory reform and the fight against illicit activities. Initiatives are underway to create a more attractive investment environment, potentially including tax breaks for manufacturers, special economic zones and affordable financing options. By offering these incentives, Ghana positions itself as a competitive destination for manufacturing businesses, leading to a potential increase in investment, job creation and technological advancement in the sector.

It should be noted that illicit trade not only undermines public health efforts but also diverts substantial revenues that could otherwise be invested in national development.

Illicit trade in Ghana is not a new phenomenon. This is a long-standing problem involving organized crime. The problem ranges from non-declaration or under-declaration of goods to trafficking in contraband and counterfeit products. Excisable products like cigarettes are prime targets because of the high profits they generate. These illicit activities harm businesses and pose significant risks and losses to developing countries like Ghana.

The Kantar 2022 Illicit Trade Report highlights a significant reduction in tax revenue – exceeding GH₵117 million between 2017 and 2023 due to illicit trade.

In light of these developments, the recent interception and destruction of illicit tobacco products worth GH₵7,951,238.39 marks a significant advancement in Ghana’s fight against illicit trade. The operation, carried out by the Customs Division of the Ghana Revenue Authority (GRA), highlights the extensive measures taken to combat illegal activities. However, these efforts must be expanded and intensified.

Recognizing the global nature of the problem, Ghana is not tackling it alone. The Economic and Organized Crime Office (EOCO) collaborates with international bodies such as the World Health Organization (WHO) and the Food and Drugs Authority (FDA). This partnership ensures compliance with international tobacco trade laws and promotes the development of effective law enforcement strategies to combat this criminal activity.

These measures, combined with recent actions such as the destruction of seized illegal tobacco products, demonstrate Ghana’s strong commitment to eradicating the illicit tobacco trade. By protecting public health, preserving tax revenues and fostering a fair market, Ghana’s multi-faceted approach has the potential to create a healthier and more prosperous future for all its citizens.

The Customs, Excise and Preventive Service (CEPS) is also taking crucial measures. A comprehensive training session brought together representatives from various agencies including the FDA, Ghana Standards Authority (GSA), Ghana Police, Ghana Army and the Ghana Immigration and Narcotics Control Commission (NACOC). The workshop aimed to assess the full extent of the illicit cigarette trade in Ghana and develop effective countermeasures.

The collaboration resulted in a new public awareness campaign including T-shirts, posters and advertisements to raise awareness of the dangers of supporting the illegal cigarette market. The workshop also addressed factors contributing to illicit trade: porous borders, limited resources of law enforcement agencies, and links to organized crime groups. Additionally, rising costs of living and increased taxes on legitimate cigarettes have been identified as pushing consumers toward illicit, cheaper alternatives.

It is imperative that the government gets behind the GRA and expands its efforts beyond tobacco to all other areas of the illicit trade. This comprehensive approach will ensure that Ghana maximizes its sources of revenue and strengthens its economy. By extending the crackdown to other sectors plagued by illicit trade, the government can further secure the country’s economic future and provide a safer and more prosperous environment for its citizens.

The current momentum of the government must be maintained and amplified through initiatives, strengthening inter-institutional cooperation and intensifying public awareness campaigns. Ghana can build on its progress and continue to close the gaps that allow illicit trade to thrive. This will not only protect public health and legitimate businesses but also ensure that every Cedi of revenue is used for the development of the nation. Now is the time to act and, through collective effort, Ghana can plug this leak for good.

Written by Peter Bismark Kwofie
CEO/President, Institute for Liberty & Policy Innovation – ILAPI.

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