- 12 Marks
Question
The free zones enclave offers a fair business environment to all business operators irrespective of nationality, creed, or color. It has attracted both indigenes and foreigners. The benefits from the free zones appear very impressive, hence the numerous applications requesting to be granted free zone status.
Required:
i) Explain the concept of free zones.
(2 marks)
ii) Explain TWO (2) policy rationale for the establishment of the free zone.
(2 marks)
iii) Explain FOUR (4) reasons you would advise an investor to invest in a free zone enterprise.
(8 marks)
Answer
i) The free zone is a non-custom controlled territory. It is an export-led initiative. It can be an enclave or a single factory. Customs facilitate it but do not control it. The free zone is associated with huge tax incentives to make their products competitive.
(2 marks)
ii) The policy rationale for the establishment of the free zone includes:
- To support the growth of exports.
- To provide employment for the citizenry.
(2 marks)
iii) Reasons to advise an investor to invest in a free zone enterprise include:
- Free zone enterprises are exempt from tax for the first 10 years of operation.
- After the first 10 years of operation, export is taxed at the rate of 15%.
- Imports into the free zone are exempt from tax.
- VAT, NHIL, GetFund, and Covid-19 levies are exempt from tax.
- Dividends paid to shareholders are exempt from tax.
(8 marks)
- Tags: Business Environment, Free zones, Investment benefits, Policy rationale, Tax Incentives
- Level: Level 3
- Topic: Tax administration in Ghana
- Series: MAR 2024
- Uploader: Kwame Aikins