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IMF To Support Ghanaian Tax Reform

by Lorys Charalambous, Tax-News.com, Cyprus

23 April 2015


Alongside its approval of a USD940m loan for the country, the International Monetary Fund has called on Ghana to implement key tax reforms.

According to the Fund, the Ghanaian Government is already taking adjustment measures necessary to help offset lower-than-budgeted oil revenue, but it said that further improvements to revenue collection are needed, alongside tax administration reforms.

Ghana's fiscal deficit reached 9.5 percent of gross domestic product (GDP) in 2014, against a budget target of 8.5 percent. Although oil revenues are expected to come in below targets, the overall deficit is expected to decline to 7.5 percent of GDP in 2015 and fall to 3.5 percent by 2017.

The IMF said the approved 2015 Budget "is ambitious and included significant measures to achieve strong fiscal consolidation." On the revenue side, measures included the imposition of a 17.5 percent Special Petroleum Tax (introduced in November 2014); and the implementation of a value added tax (VAT) on fee-based financial services; and a five percent flat rate tax on real estate, implemented in January 2015 to broaden the tax base.

Together with the extension to 2017 of the 1-2 percent special import levy on some imported goods, the impact of the new revenue measures has been estimated at about two percent of GDP.

The IMF said the Ghanaian tax system is "fundamentally sound and based on the essential pillars of a modern tax system," but is "undermined by [its] reliance on discretionary tax treatments, in the form of exemptions, special regimes, and tax holidays (amounting to perhaps six percent of GDP), which hinder economic efficiency, fair competition, and revenue mobilization."

The Government has committed to review existing concessions to broaden the tax base. In addition, with IMF technical assistance, the Ghana Revenue Authority is to implement a new Strategic Plan covering 2015-17. Under the plan, VAT registration thresholds will be increased and the Government will seek to speed VAT refunds from September.

TAGS: compliance | tax | small business | business | value added tax (VAT) | tax compliance | fiscal policy | financial services | real-estate | budget | International Monetary Fund (IMF) | tax breaks | import duty | Ghana | services | VAT refunds | Tax

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