Editorial: Tax that punishes value addition

The ongoing conversation about the 20 percent excise duty on natural fruit juices is fast becoming another example of a well-intentioned policy producing damaging economic outcomes.

Introduced under the guise of revenue mobilisation and public health, the tax is instead punishing value addition, weakening competitiveness and undermining the country’s export ambitions.

At a time when the threat of cedi volatility still remains, coupled with an urgent need to diversify exports, it is difficult to justify a policy that raises costs for an industry with clear comparative advantages.

Natural fruit juices made from pineapples, mangoes, citrus and coconuts are not luxury imports or harmful ‘sin products’. They are the end result of domestic agriculture and industrial processing. Taxing them as if they were tobacco or alcohol reflects poor policy targeting.

The economic implications are not abstract as the nation spends hundreds of millions of US dollars each year importing beverage concentrates and sweetened alternatives.

A competitive local juice industry could replace a significant share of these imports, retain foreign exchange and support the cedi.

Instead, the excise duty inflates shelf prices, reduces demand and forces factories to operate far below efficient capacity. This is a textbook case of policy working against itself.

Global demand for natural and functional beverages continues to rise, driven by health-conscious consumers across Africa, Europe and North America.

Ghana has the raw materials, labour and geographic positioning to compete. Yet an additional 20 percent tax at the production stage erodes price competitiveness and discourages the long-term contracts that export manufacturing depends on.

No serious export industry is built on unstable or punitive cost structures.

Beyond exports, the duty carries social costs that deserve attention. Agro-processing supports farmers, transporters, factory workers and service providers, many of them young people and women.

When production slows, these livelihoods are the first casualties. Any short-term revenue from the excise duty must therefore be weighed against lost PAYE, weaker corporate tax receipts and increased social pressure.

Fiscal policy should support national priorities, not contradict them. If we serious about agro-industrialisation, import substitution and export-led growth, then our tax regime must reflect that ambition.

Would a more sensible approach be to exempt 100 percent natural fruit juices while retaining excise duties on heavily sweetened and artificial beverages? Let’s hear the debate.

Taxing away a future industry is not economic prudence. It is policy short-sightedness. Surely, we can, and must, do better.

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