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Ghana Introduces Revenue-Increasing 2016 Budget

by Lorys Charalambous,, Cyprus

16 November 2015

Ghana will seek higher taxes in its 2016 Budget through improvements to tax administration rather than increasing the tax burden.

Despite recent oil and commodity price reductions, the Government's total tax revenues in 2015 are estimated to have increased by nearly 30 percent over 2014 levels, reaching 18.8 percent of gross domestic product (GDP). Total revenues are forecast to rise by almost the same percentage again next year.

As a consequence, Ghana's fiscal deficit in 2015 is expected to fall to 7.3 percent of GDP, from 10.2 percent of GDP last year. Ghana is targetting a deficit of 3 percent of GDP by 2018.

A new Income Tax Act, which was recently passed by Parliament, will be fully implemented in January 2016. The new Act will simplify the country's income tax regime and broaden its scope, boosting revenues by 0.3 percent of GDP.

To improve tax compliance and administration during 2016, the Ghana Revenue Authority (GRA) will modernize its operations; establish joint teams to conduct special audits and investigations; and extend its schemes for taxing the informal sector.

The Government is reviewing the existing tax exemption regime, as tax expenditures reached over two percent of GDP in 2015. Henceforth, no government ministry, department, or agency will be able to negotiate and conclude contracts that grant tax exemptions without approval from the Ministry of Finance.

The GRA is to roll out fully its excise tax stamp project, under which tax stamps are to be fixed on all excisable products imported or manufactured for consumption in Ghana. The project is expected to reduce the smuggling of tobacco and alcoholic products and the influx of counterfeit products into the Ghanaian market. The under-declaration of these goods – both imported and locally produced – has led to a significant loss of tax revenue.

Finally, to provide tax relief to individuals on lower incomes, the Minister announced an increase to the minimum income tax threshold. In addition, a new value-added tax threshold of GHS200,000 (USD52,870) is also to be introduced, to ensure that only taxpayers who are capable of complying with VAT accounting and invoicing requirements are obliged to register.

TAGS: individuals | compliance | tax | business | value added tax (VAT) | tax compliance | fiscal policy | budget | excise duty | tax authority | tax breaks | individual income tax | Ghana | Africa | Tax

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