Row Over Sachet Water Prices

By Samuel Boadi & Charles Nixon Yeboah
THE FRACAS between sachet water producers and Government over the latter’s imposition of a 20 percent ad valorem tax on packaged water transcends into new heights as the Value-Added Tax (VAT) Service has indicated it is bent on collecting the tax willy-nilly.
Some executive members of the Ghana National Association of Sachet Water Producers, whom BUSINESS GUIDE spoke to on the subject, indicated: “Well, if Government is still bent on imposing this hasty decision on us at all costs, we have no option than to pass on the costs to the customer since we cannot afford to lose.”
According to the executives, the increment could have been made gradually instead of the harsh manner in which it is being imposed on producers. They added that the repercussions of such a decision could spell disastrous consequences for both the staff of sachet water producers and consumers.
“If the tax heat becomes so intense for our members to bear, the only way out would be to lay off most of our workers.
“Government should know that it is charting a course that will eventually deprive a greater chunk of our workers jobless. It should not only think about the revenue it will make from the imposition but on the fate of the youth.”
By the foregoing, the retail price of sachet water is expected to witness a 100 percent price hike soon from 5 pesewas to 10 pesewas. Similarly, the price of distilled water used at the hospitals and industries could also go up and affect inflation.
There are about 45,000 sachet water producers in the country, and expressed the worry that getting all the members registered for the consensus before the February ending deadline could be an uphill task for the association.
The announcement of the tax has gone further to affect the price the locally distilled gin ‘akpeteshie’. A jerrican of the gin has hiked up from GH¢90 to between GH¢120 and GH¢130. And seemingly, a bottle of the product has also jumped from GH¢1.40 to GH¢2.40, while a tot has also shot from Gp10 to Gp20.
In the case of bottled water, the 1.5 litre, currently selling at GH¢1.00 will go for GH¢1.10, while the 0.5 litre bottle will move from 50 pesewas to 60 pesewas. The effects of the tax increment is said to affect the price of other brewed lager beers, such as Guinness, Castle Milk Stout, Gulder, Stone, among others. This is so because a 50 percent excise levy on the brewery industry would also affect them and complicate their businesses.

Government announced a 20 percent excise tax for all bottled, sachet, distilled water and alcoholic beverages in the 2010 Budget as part of measures to generate more revenue for the nation.
It is as a result of this misunderstanding that the Ministry of Finance and Economic Planning has mandated a technical committee to reconsider the law that tasks the Value Added Tax (VAT) Service to charge an ad valorem tax on packaged water. This was after the chairman of the committee that drafted the law had complained that his members did not impose the tax on sachet water. As to whether consumers would be made to pay for the price of sachet water will depend on the final verdict to be arrived at by the technical committee.
Meanwhile, a member of the Parliamentary Select Committee on Finance James Avedzi, says the drafters of the law on ad valorem did not include sachet water in the list of items to be taxed. According to him, the committee agreed that sachet water should be excluded during their deliberations.“We have not imposed tax on sachet water; we have imposed tax on bottled water…the law that we passed says packaged bottled water so those that probably you drink – voltic…are those that are going to attract taxes,” he said. But both the VAT Service and the Ministry of Finance have justified the inclusion of sachet water.
The rationale behind the imposition of the ad valorem tax from the majority side in Parliament hinges on the health of consumers hence the outrageous increment while the minority have touted for affordability of its price to enable more people enjoy it.