How a hotel was designated as 1D1F and granted $4 million tax exemption
How a hotel was
designated as 1D1F and granted $4 million tax exemption
Date:
August 21, 2023
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The Le Meridien hotel project, which 4-mac
Limited received US $ 4 m tax waiver in December 2022.
In December 2022, Parliament granted a US$4
million tax waiver under the One District (1D1F), One Factory programme to
4-Mac Limited, a company that is building a hotel at Airport Residential in
Accra.
The waiver is to cover import bills and other
import-related taxes of the company. The company also received a five-year tax
holiday.
The parliamentary approval followed a request from the
Ministry of Finance dated July 25, 2022. The ministry initially sought approval
for almost US$6.4 million in import tax relief for the construction of the
four-star, Le Meridien hotel. The 160-room hotel is expected to open its
doors to customers in 2025.
The Ministry of Finance wanted the relief granted in line
with the tax exemption regime under the One District, One Factory Programme.
This means the company would not pay a pesewa in taxes when it imports
materials and equipment within the exemption granted. Additionally, the finance
ministry asked that parliament allow the company not to pay VAT on items it
procures locally for the project. Companies in this category also benefit from
a five-year tax holiday.
But there are
questions about the tax exemption for this hotel.
It was packaged under
the government’s flagship industrialisation policy, ‘One District, One
Factory’. Over the years, the government has portrayed the 1D1F programme as an
ambitious policy to grow the manufacturing sector. It is the blueprint of the
government for attracting investments into the sector in all 261 districts
across the country.
As Parliament’s Standing orders (169) required, the
finance ministry’s request was forwarded to the House’s Finance Committee,
chaired by the Member of Parliament for Obuasi West, Kwaku Kwarteng.
The committee in its report to the House dated November
25, 2022, recommended that the request be approved, but it reduced the amount
from US$6,389,428 to US$3,919,628.
“The Committee noted that included in the taxes to be
waived was domestic Value Added Tax which is a domestic indirect tax. The
Committee however considered that in the light of the new tax exemptions
regime, domestic VAT should be removed from the basket of waivers,” the report
stated.
Making a case for the exemption, the report said the tax
waiver for 4-Mac Limited is consistent with the government’s overall policy to
propel industrial growth under the 1D1F programme as it would contribute
significantly to job creation in the tourism and hospitality sector.
Convinced by the report of the Finance Committee, the MPs
approved the tax exemption for 4-Mac Limited. This was on December 7, 2022,
five months after it was brought to the House.
According to Parliament’s records for that day, the
Finance Committee’s justification for the approval of the request was that it
was part of the “effort to speed up industrialisation and in line with the
government’s policy of granting tax reliefs to new companies under the One
District One Factory Programme, the government intends to grant tax reliefs on
equipment and materials to be imported for the execution of the Le Meridien
Hotel project.”
The Finance Committee indicated that its work is guided by
documents including the 1992 Constitution, the Standing Orders of Parliament,
and the Guidelines for the Approval of Tax Waiver under the 1D1F programme.
That guideline, developed by the Finance Committee, was
approved by the House in June 2022, ostensibly to provide tighter control
against the abuse of tax waivers within the framework of 1D1F.
Some experts The
Fourth Estate interviewed believe the decision to grant nearly
$4 million in tax waivers to 4-Mac Limited defeats the benefits of 1D1F the Finance
Committee outlined in the guideline for 1D1F tax waivers.
“The Committee observed that when successfully executed,
the Programme would ultimately lead to the establishment of at least one
factory in each of the 260 districts in the country. It would help address the
rural-urban drift and lead to the creation of jobs and an increase in
Government revenue,” the guideline said of the potential benefits of the 1D1F
programme.
A list of 1D1F companies The Fourth Estate obtained from the Ministry of Trade
and Industry on December 15, 2022, did not even have 4-Mac Limited as part of
the beneficiaries of the programme.
Though the Ministry of
Finance asked for over US $6m tax waiver for 4-Mac limited, Parliament’s
Finance Committee granted US $4 m for the hotel project at Airport West near
the National Children’s Library.
When The Fourth Estate visited the
project site on August 15, 2023, no construction was taking place. The site had
been cordoned off.
The security man at the post told The Fourth Estate that it had been
on hold for a while but could not disclose exactly when it started nor when
construction would resume.
However, people familiar with the building said
construction work on the building started before the Akufo-Addo administration
came to power in 2017. Its car park was a parcel of land owned by the Ghana
Library Authority, which was sold to the developer, checks by The Fourth Estate revealed.
Finance ministry & Parliament’s response
The Fourth Estate on Wednesday, August
9, 2023, reached out to the Ministry of Finance requesting an interview on the matter
with Dr John Kumah, a deputy minister, whom parliament consulted extensively on
the development of the guideline on 1D1F
tax waivers.
The ministry’s Head of Communication, Cecilia Akwetey,
said “The request has been forwarded to the deputy minister’s office. They will
reach out.”
They did not. The
Fourth Estate followed up with calls to Dr Kumah on August 15,
2023, but got no response.
However, he responded to a text and WhatsApp messages
saying “Please, kindly write formally to the minister so the specific schedule
officer may assist with the appropriate response. I don’t handle that schedule,
thanks.”
That letter was
submitted to the Ministry of Finance on Wednesday, August 16, 2023. The
ministry has not responded at the time of publishing this story.
Similar attempts to reach the Chairman of the Finance
Committee of Parliament, Kwaku Kwarteng, have not yielded fruits. Mr Kwarteng
directed The Fourth Estate to
the finance ministry for a response.
Over the years, the government had created the impression
that the programme was for only the manufacturing sector. In February 2018, the
Minister of Finance, Ken Ofori-Atta submitted a memorandum to Parliament that
sought to request approval for incentives to support the implementation of the
1D1F programme.
In that document, the government mentioned manufacturing
businesses in sectors such as agro-processing, light industries,
pharmaceuticals, petrochemicals, garments and textiles as the target sectors
for 1D1F tax incentives.
The 1D1F Programme
The One District One Factory (1D1F) initiative was one of
the campaign promises of the New Patriotic Party (NPP) ahead of the 2016
general elections.
The then-candidate Nana Akufo-Addo said he wanted to
“change the nature of Ghana’s economy from one which is dependent on import and
export of raw material to one which is focused on the manufacturing, value
addition and export of processed goods” for which reason every district is
expected to get at least on the factory.
To realise this, in July 2018, the Cabinet approved the
request for companies under the 1D1F programme to be granted tax incentives by
the government.
Parliament in the same year gave the green light to
operationalise the tax exemptions to cushion the beneficiary companies’
production cost.
The tax incentives, according to Parliament, were intended
to make industrial production competitive and attractive to the private sector
as well as create an enabling environment for private companies to thrive.
Hotels do not fall
under the industralisation policy bracket – Bright Simons
Contrary to the government’s position, Bright Simons, the
Honourary Vice-President of IMANI Africa believes that while hotels could not
be considered strategic within the framework of industrialisation, in tourism,
the focus should be on regions that are currently undeserved or places close to
tourist sites.
“The national tourism development plan bemoans the
overconcentration of high-end hotels in Accra, for instance. So, on top of
hotels not falling within the industrialisation policy bracket, even within the
tourism sector within which it falls, there is no basis for the government
losing tax revenue to incentivise the setting up of yet another high-end hotel
in a location saturated with high-end hotels.
“Another high-end hotel within the Airport City enclave which
already has an excess of high-end hotels will not contribute to the current
priorities of Ghana’s tourism strategy.”
Going forward, he suggested that there should be a fixed
budget for exemptions and sectoral quotas where companies seeking to benefit
from a quota must compete for a portion of the funds through a transparent and
merit-based process.
Hotels, he explained further, cannot be considered
strategic within the framework of the industrialisation policy as they fall
within another policy bracket – tourism. However, even within tourism, the focus
must be on regions that are currently underserved or places close to tourist
sites.
Abuse of the Tax Waivers
According to the Finance Committee, the tax incentives are
subjected to abuse.
After six years of its implementation, it has been
observed that companies that received tax waivers are importing items that can
be procured locally.
“The Committee holds the view that companies that benefit
from tax waivers should be compelled to procure items locally if they are
available as a way of promoting made-in-Ghana goods.”
It was the reason the guidelines for 1D1F tax incentives
was developed.
However, in the case of 4-Mac Limited, the guideline seems
to have little significance, as the construction of the luxurious hotel is
granted tax relief that the government’s own legislation instructed should be
aimed at benefiting manufacturing factories.
The government’s objective for the One District, One
Factory policy was that it would, among other things:
·
Create
massive employment, particularly for the youth in rural and peri-urban
communities, and thereby improve income levels and standards of living, as well
as reduce rural-urban migration,
·
Add
value to the natural resources of each district and exploit the economic
potential of each district based on its comparative advantage,
·
Ensure
even and spatial spread of industries and thus stimulate economic activity in
different parts of the country.
·
Promote
exports and increase foreign exchange earnings, and,
·
Enhance
the production of local substitutes for imported goods thereby conserving
scarce foreign exchange.
Critics of the policy argue that it has fallen far short
of expectations. The anticipated benefits, such as reducing the nation’s
substantial import bill, bolstering foreign exchange reserves, adding value to
raw materials, and mitigating rural-urban migration, have yet to materialise,
leaving the nation vulnerable in the face of the current economic downturn.
Furthermore, experts are concerned about the government’s
decision to provide tax exemptions and holidays for the development of a lavish
hotel, particularly during a period of heightened revenue needs.
This is not the first time the government has granted a
hotel tax exemption. Except that this time, it was under the 1D1F programme.
In 2020, there was a public uproar about
the government’s justification for granting Platinum Properties’ Airport City
Project a $23.9m tax waiver for the Pullman Accra Airport City Hotel and
Serviced Apartments.
This waiver and many
others informed the demand for an Exemptions Law which was passed in July 2022
and received Presidential assent in September 2022.
The
law set clear eligibility criteria for tax exemptions and
provides for the monitoring, evaluation and enforcement of exemptions.
It is also to provide
a regulatory regime for monitoring tax exemptions to ensure that exemptions
granted are used for the intended purposes, as well as curtail the abuse of the
existing exemption regime.
With the government imposing more taxes on businesses and
the citizenry to salvage the economy, experts say the government should not be
trading off much-needed revenue for luxurious hotels under the guise of a 1D1F
programme.
In all these, is 4-Mac
Limited or Le Meridien registered in Ghana? Who is the face behind it? All
these questions will be answered in the second part of this story.
Former Member of Parliament (MP) for Tamale Central, Inusah Fuseini says it is unwise for the Bank of Ghana (BoG) to commence the construction of a new building project while the institution is facing financial difficulties.
According to him, the BoG holds a fiduciary responsibility to the people of Ghana because the bank belongs to the entire Ghanaian populace.
Speaking on JoyNews’ Newsfile on Saturday, Mr Fuseini said that decision taken by BoG must be taken prudently and that the bank should be accountable.
“No one is saying that they conceived the idea of building a bank in 2017, no one has said that, but building the bank in 2021 at the height of our economic and social crisis, was it a prudent decision?
“That goes to show that the bank has been so mismanaged and the managers of the bank have not exercised prudence in their decision making and that has led us to the situation in which we are,” he said.
The former Roads and Highways Minister’s assertion follows the BoG’s recent statement that it is spending $250 million to build a new head office because its current office which was built in the 1960s has failed a structural integrity assessment.
It said, the edifice “is no longer fit for purpose and could not stand any major earth tremors.”
In a press release on Tuesday, August 9, the central bank explained that “The outcome of the structural integrity work was that the main building does not satisfy the full complement of excess strength required for a building to be considered safe for usage.
“This means that in the case of a worst-case gravity and wind loading scenario, for example, unusually strong wind, the building may be significantly affected.”
On the back of this, Mr Fuseini said that it is not prudent for BoG to start the building of a new headquarters after recording a GH¢60.8 billion loss and negative equity of 55 per cent for 2022.
“The project is ongoing! If you know a project life, there’s a budget for it and the project has a gestation period. The project is still ongoing, the current crisis in which we are, the project is still ongoing. ….. it’s not that the money is sitting in the bank, if the money were sitting in the bank, they wouldn’t have a negative equity of the 55% for 2022,” he said.
The lawyer emphasised that “At the time the project was starting, no reasonable bank manager would have committed to invest when we were still suffering the ravages of Covid-19 on the economy and the projections said that our economy was going to slow down. No reasonable person would do that, when countries were taking steps to protect the economic fundamentals of their countries.”
Meanwhile, the Minority in Parliament has called out the Governor of the central bank and his deputies after the lender of last resort reported a ¢60.8 billion loss for 2022.
The Minority Leader Dr Cassiel Ato Forson has questioned why Dr Ernest Addison is spending $250 million to build a new head office for the central bank at a time the Bank is in financial difficulties.
SOURCE: Joy News
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By Laud Nartey -March 17, 2023
Investigative journalist Anas Aremeyaw Anas
has told Justice Eric Baah, the judge who presided over his case against Assin
Central Lawmaker Kennedy Agyapong, that he made a mistake in his judgment in
throwing out the case.
Anas said he disagreed with the judge both on law and on the facts of the case. He accused Justice Baah of delving into the arena of criminal prosecution against him despite the matter being a civil case.
“My team and I and the lawyers have carefully studied the judgment delivered by the court and we are unanimous that the judge made an overreach and descended into the arena and made criminal pronouncements about me as If I was standing a criminal trial.
“He also justified the MP accusing me of the murder of JB Danquah, murder of 20 Chinese nationals. We are filing an appeal because there was no evidence provided,” Anas said in a video recording responding to the judgment.”
He added “…I disagreed with the judge’s ruling both on law and the facts. when I started this work 21 years ago, I never assumed that it would be an easy road yet it is the evidence in my work and the commitment to truth and justice that has always led and prevailed against all the forces that have worked to pull us down” The Accra High Court on Wednesday, March 15 dismissed the GH¢25 million defamation suit against Kennedy Ohene Agyapong brought by investigative journalist Anas Aremeyaw Anas.
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This was after Anas, in 2018, sued the New Patriotic Party (NPP) lawmaker for allegedly defaming him. Anas prayed to the court to award GH¢25 million against Mr Agyapong to compensate him for the defamatory material published against him by the MP.
The court concluded that what Anas is engaged in is not investigative journalism but rather “investigative terrorism” and that Agyapong was justified to call Anas “a blackmailer, corrupt, an extortionist, and evil”.
“I find the claims by the plaintiff [Anas Aremeyaw Anas) meritless and they are hereby dismissed,” Justice Baah ruled.
By Laud Nartey|3news.com|Ghana
UBS to acquire Credit Suisse - FT
[1/2] A logo is seen on the headquarters of Swiss bank UBS on Paradeplatz in Zurich, Switzerland March 16, 2023. REUTERS/Denis Balibouse
March 17 (Reuters) - Banking giant UBS (UBSG.S) is in discussions to take over all or parts of Credit Suisse (CSGN.S), with the boards of Switzerland's two biggest lenders set to meet separately over the weekend, the Financial Times reported on Friday.
The Swiss National Bank and regulator FINMA are organizing the talks in an attempt to build confidence in the country's banking sector, the report said, citing people familiar with the matter.
On Friday evening, Swiss regulators informed their counterparts in the United States and United Kingdom that the merger of the two banks was their "Plan A" to salvage the confidence in Credit Suisse, the report added.
Several other options are also under discussion between the two banks as both sides try to evaluate regulatory constraints in different jurisdictions, the newspaper reported.
Bloomberg reported on Thursday that UBS Group AG and Credit Suisse were opposed to a forced merger, with UBS preferring to focus on its own wealth-centric strategy and reluctant to take on risks related to its smaller rival.
Credit Suisse is biggest bank to be ensnared in the market turmoil following the collapse of U.S. lenders SVB and New York-based Signature Bank, forcing the Swiss lender to borrow up to $54 billion from Switzerland's central bank to shore up liquidity.
SOURCE: REUTERS
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