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Ghana's 2015 Budget Imposes Special Petroleum Tax

by Lorys Charalambous,, Cyprus

24 November 2014

The 2015 Budget, presented recently in Parliament by Ghana's Finance Minister, Seth Terkper, looks to reduce the country's high fiscal deficit, in part through the imposition of a special petroleum tax.

Oil revenues have increased so far this year, enabling stimulus measures, but these heightened revenues are purely the result of increased industry activity and expanded oil company income taxes. Revenues would otherwise have fallen due to lower global oil prices as well as a slowing economy.

Domestic tax revenue, across the board, is projected at GHS23.9bn (USD7.5bn), 3.6 percent lower than the budget estimate of GHS24.8bn.

The 2014 Budget had targeted a reduction in Ghana's fiscal deficit from 10.1 percent of gross domestic product (GDP) in 2013 to 8.5 percent of GDP in 2014. However, the deficit has remained stubbornly high and is now expected to total 9.5 percent of GDP this year.

The Government's target in the medium-term is to reduce the fiscal deficit progressively to 3.5 percent of GDP by 2017. This reduction is to be driven by tax policy improvements and revenue administration reforms.

In 2015, the Government will implement a number of outstanding value-added tax (VAT) measures and in particular the introduction of VAT on fee-based banking and financial services at the headline 17.5 percent rate, as well as a 5 percent VAT rate on real estate, already passed by Parliament.

In addition, the Government is proposing to impose a special petroleum tax of 17.5 percent on petrol, diesel, liquefied petroleum gas, natural gas, and kerosene, as part of this VAT reform, alongside a change in the petroleum product pricing structure. Excise tax on petroleum will newly be levied by volume, rather than by value.

In addition, the National Fiscal Stabilization Levy, charged at five percent on the profits of specific companies, and the special import levy of one to two percent will be extended to 2017. Last, the withholding tax on directors' fees will be increased from 10 percent to 20 percent.

TAGS: Finance | tax | value added tax (VAT) | fiscal policy | banking | financial services | real-estate | budget | corporation tax | oil and gas | tax rates | withholding tax | import duty | revenue statistics | individual income tax | Ghana | services

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