Reversal of Benchmark Value Discounts: What does this mean?
In 2019, government granted a discount on the benchmark value of certain selected imported items. The discount was thirty percent (30%) of the value of imported vehicles and fifty percent (50%) of the value of other imported items.
Government’s Directive (In 2022)
In the 2022 National Budget, Government announced a reversal of benchmark value discounts granted in 2019 on certain imported goods. On 4th January, 2022, the Ghana Revenue Authority (GRA) began to implement government’s directive. However, based on concerns raised by various stakeholders about its poor implementation, the implementation date has been extended to 17th January 2022.
Understand it this way
Enough of the jargon and technicalities! Understand it this way: benchmark means reference point. When goods are imported into the country, the Customs Division of the Ghana Revenue Authority (GRA) tries to value the goods. They determine the value of the goods by using their internal database which is based on the world prices of similar goods. This is done to ensure that the value assigned to imported goods is largely reliable and easy to verify.
The custom’s benchmark value is therefore the reference price or reference value derived from the database. This is used to determine the value to assign imported goods. Other import charges such as duties and clearing charges are specific percentages of the benchmark value.
Government’s Intention (In 2019)
In 2019, government granted a discount on the benchmark values to achieve the following objectives:
● To reduce the incidence of smuggling
● To make Ghana’s port competitive and promote import through Ghana’s port
● To reduce exorbitant port charges
Government’s Intention (In 2022)
In 2022, government has decided to reverse the discounts in order to achieve the following objectives:
● To protect the environment
● To grow local production and make it more competitive
● To support public health and safety
● To meet revenue targets
The reversal of benchmark value discounts will affect items in three categories: The home delivery value of vehicles; Goods on which benchmark values are applied; All other goods.
The comprehensive list of items affected is shown in Appendix A below.
Analyzing the Impact
We analyze government’s policy choice from three perspectives:
● Business opportunities for local producers
Clearly government’s intention is to reduce reliance on certain imported goods and redirect demand to local goods since most of the goods on the list are price-sensitive. This offers existing local producers the opportunity to scaleup production. It also affords prospective local producers the opportunity to venture into the production of some of the items specified in Appendix A. However, the fundamental issue has to do with the funding opportunities available to local producers, product quality, the existing skills gap and how to spur demand for products. Also, the question which we must ponder is whether government has been able to achieve much under its One District One Factory (1D1F) initiative and industrialization drive.
● Dependence on imported products versus import substitution
Ghana still depends largely on imports. Until we reach a point where it is very clear that our local producers have the capacity to produce substitutes for imported goods or even give us better alternatives, it will not be prudent to introduce policies that will make the cost of imported goods very high.
● Price hikes
The reversal of the benchmark value discounts will make the price of imported consumer goods very expensive and this will be passed on as additional cost to the final consumer. If the local industry is not able to absorb demand, that could in itself lead to potential price hikes of existing local products as demand outstrips supply. Excess demand will be directed back to imported goods which will defeat government’s objective.
Pasta, Spaghetti, noodles, macaroni
Palm oil - crude and refined
Aluminium finished products
Toilet paper, facial tissue and towel
Cartons, boxes of paperboard cases of corrugated paper
Water, soft (incl., mineral & aerated with sugar (incl., sweetened)
Plastic – Chapter 39
Iron steel bars and rolls forged
Tomato paste and Ketchup
Cement paper bags
Furniture and parts
Toilet Soap/ Laundry bar soap
Detergent Washing Powder
Soft drinks and carbonated drinks
Flexible packaging materials
Machinery, all equipment and Plants
All mining items
Toffees and chewing gum
Leather and Articles of leather
Arms and Ammunitions
Electrical Machinery and Equipment, Parts