About a year ago, the Minister for Finance, Mr Ken Ofori-Atta announced in the 2018 Budget Statement and Economic Policy a number of fiscal measures aimed at improving Government’s domestic revenue mobilisation.
According to the Finance Minister, boosting domestic revenue collection through improved tax compliance and effective revenue administration formed an important part of the fiscal strategy of the Government for 2018 and the medium term. In line with this strategy, additional tax policy measures were also introduced in the July 2018 Mid-Year Fiscal Policy Review of the 2018 Budget.
Fiscal Year 2018: A review
Following the 2018 Budget reading and mid-year budget review in July, there were a number of tax laws and amendments introduced including the following:
Tax amendments that became effective on 1 January 2018
• Abolition of tax on lottery winnings;
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• Full tax exemption for mutual funds and unit trust schemes;
• The introduction of the young entrepreneur tax relief;
• Tax exemption of reinvested profits of private universities; and
• Accelerated capital depreciation granted to importers and manufacturers of excisable goods (to encourage the Tax Stamp programme).
Although no significant tax breaks were given to individuals under the budget, there was a revision of the graduated tax scale for resident individuals aimed at aligning the tax-free band on income to the new minimum wage rates.
Also, the following amendments were passed:
• An amendment to the Value Added Tax (“VAT”) law required the Commissioner-General to appoint selected VAT registered persons to act as VAT withholding agents. These allowed such withholding agents to hold back a 7% portion of the value of standard rated supply and remit the same to the GRA by mid-month;
• The Tax Amnesty window was opened to encourage voluntary disclosures on non-compliance. The tax amnesty targeted both immediate revenue mobilisation from unreported taxes in the past and the preservation of future revenues from the registration of taxpayers who otherwise would have remained unregistered;
• The sunset provisions on the National Fiscal Stabilization Levy and the Special Import Levy were extended to 31 December 2019; and
• Amendments were made to the Customs Act aimed at curbing any potential abuse of the bonded warehouse system.
During the first half of 2018 – additional tax laws
We saw the coming into force of the following:
• The African Union Levy of 0.2% on specific imports on 12 January 2018;
• In February, the Special Petroleum Tax Amendment Act changed the ad-valorem tax rate to specific rates on selected fuel products; and
• During the month of May, the Taxation (Use of Fiscal Electronic Device) Act and the Standard for Automatic Exchange of Financial Account Information Act were introduced aimed at promoting VAT compliance and general tax compliance respectively.
Though an old law, the rules on affixing of excise stamps were enforced with a clear start date of March 2018.
The second half of 2018 – new tax rules occasioned by the mid-year review
The mid-year review of the 2018 budget came up with very significant changes to the existing tax laws. The main change was around VAT. The new reporting requirements of the amended VAT law required the issuance of administrative guidelines by the Ghana Revenue Authority, due to their complexity.
A statement from the Minister of Finance around the VAT changes was as follows:
“Mr. Speaker, Government is…consolidating contributions to the Health Insurance Fund Levy and the GETFund portion of the VAT into a separate Health and Education Levy. This will enable Government isolate and increase the budget for health and education. Both the Health Insurance Fund and the GETFund levies will continue to be 2.5 percent each, while the applicable VAT rate is 12.5 percent.”
By 1 August 2018, the amendment to VAT (and the Ghana Education Trust Fund Act) became effective requiring VAT registered persons to file two separate returns to the GRA.
Effective the same day, the Income Tax Act was also amended to mainly introduce an additional tax band of 35% for resident individual taxpayers who earned income above GHS 120,000 in a year. A corresponding amendment was made to the non-resident individual tax rate from 20% to 25%.
Finally, a new Luxury Vehicle Levy was introduced for DVLA to impose specific levy amounts on vehicles with engine capacity of 2950cc and above.
At the ports, the Government continued to pursue the other compliance initiatives such as the Cargo Tracking Notes (CTN) and the prohibition of certain consumable goods from warehousing.
There were a number of changes which impacted both direct and indirect taxes with particular focus on ensuring compliance and enforcement.
While we all await Hon. Ken Ofori-Atta’s presentation of the Government’s plan for 2019 this Thursday 15 November 2018, we anticipate that the Government may seek to align existing tax rules and make proposals around further enforcement and compliance in this next Budget. It would be particularly refreshing to see more concrete proposals in the Budget around widening the tax net as a sure way to improve domestic revenue mobilisation in the medium term.