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Ghana's 2017 Budget Looks For Improved Tax Compliance

by Lorys Charalambous,, Cyprus

06 March 2017

As promised in the recent elections, and despite the country's significantly increased fiscal deficit in 2016, Ghana's new Government has decided to balance its election promise of beginning a program of tax cuts to boost private sector growth, with an attack on tax non-compliance.

In its 2017 Budget, introduced by Finance Minister Ken Ofori-Atta on March 2, the Government plans to cut Ghana's budget deficit to 6.5 percent of gross domestic product (GDP) in 2017, from 8.7 percent on a cash basis last year (against an original target of 5.3 percent). Tax revenue fell to only 15.2 percent of GDP in 2016 (budgeted 17.5 percent), but is expected to reach 16.9 percent of GDP this year.

"Revenue administration remains a challenge," Ofori-Atta said. "To boost revenue streams, we will strengthen tax administration, reduce tax exemptions, plug revenue loopholes and leakages, and combat tax evasion. We will broaden the tax base whilst reducing and abolishing some taxes and levies."

For example, the Government has commenced stakeholder consultations to revive and roll-out the National Identification Scheme in 2017. With all registered persons being provided with a Unique Identification Number and an ID Card, the program will support the Government's "efforts to rope in economically active but undocumented citizens and the informal sector of the economy, thereby broadening the tax base."

In addition, to curb tax evasion and improve revenue collection under the value-added tax (VAT) system, electronic point of sales devices will be deployed nationally by the third quarter of 2017. Employee tax compliance will be improved by ensuring that all employers file Annual Employee Returns, and by identifying self-employed professionals to ensure that they pay tax for themselves and individuals working for them.

There will be a comprehensive review of import duty exemptions and tax reliefs, including the duties and taxes payable by both domestic and foreign companies, suppliers, and contractors, and their employees, with projects and contracts in the country. As a transitional arrangement, all applicants for exemptions and tax reliefs will be required to pay due taxes in full, before then applying for refunds.

On the other hand, within the Government's effort to stimulate private sector growth, a number of taxes that impede such growth and have low revenue-yielding potential will be reviewed, and if necessary, abolished or amended in the short to medium term.

The abolitions include the one percent Special Import Levy; the 17.5 percent VAT on financial services, on selected imported medicines that are not produced locally, and on domestic airline tickets; the five percent VAT on real estate sales; and excise duty on petroleum.

Furthermore, the special petroleum tax rate will be reduced from 17.5 percent to 15 percent; the 17.5 percent VAT rate will be replaced with a flat rate of three percent for traders; and tax credits and other incentives will be implemented for businesses that hire young graduates.

TAGS: individuals | compliance | tax | business | value added tax (VAT) | tax compliance | fiscal policy | aviation | real-estate | employees | budget | oil and gas | tax credits | excise duty | professionals | tax breaks | import duty | Ghana | services | Tax

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