ON November 15, 2017, the Minister for Finance presented the 2018 budget to Parliament. In our article below, we present to you our top 20 tax policy and administrative measures.
Distribution in Tax Revenue
The 2018 budget projects tax revenue of GH¢ 39,882 million compared to the 2017 projected outlook of GH¢31,788 million. This is about 25 per cent growth in tax revenues over the expected 2017 performance.
In order to achieve this ambitious tax revenue growth rate, the 2018 budget proposes policies that focus on granting concessions, widening the tax net and improving tax compliance rather than the introduction of new taxes. The following are measures to be instituted by the government in 2018.
Direct taxes typically refer to taxes on income and property. The 2018 budget provides some direct tax incentives with the aim of stimulating growth and putting Ghana back to work. We hav
1. Granting tax breaks to privately-owned and managed universities to help position Ghana as a higher-education hub
2. Exempting Collective Investment Schemes and Real Estate Investment Trusts (REITs) from income tax to deepen the capital market and address the housing deficit
3. Granting additional tax incentives to support agro-processing businesses under the Akufo-Addo Programme for Economic Transformation (AAPET)
4. Providing accelerated depreciation on machines of manufacturers and importers for the implementation of the excise tax stamp policy
5. Providing tax concession for Ghanaian start-up entrepreneurs under 36 years to encourage innovation and employment as part of the National Entrepreneurship and Innovation Plan (NEIP)
6. Abolishing income tax on commissions to lotto agents and lotto winnings to discourage illegal lottery activities
7. Expanding the tax-free income tax band to avoid taxing of minimum wage
8. Inculcating the culture of filing income tax returns by linking access to government services to proof of filing of returns
9. Unifying Pension Schemes in line with the National Pensions Act to create some fiscal space for government and streamlining the pensions payment process
10. Extending the validity period of the five per cent National Fiscal Stabilisation Levy (NFSL) to December 2019 to generate additional revenue for social intervention programmes
Indirect taxes, which are taxes on goods and services, remain a major part of expected tax revenue. To ensure that the targets with respect to indirect taxes are met, the 2018 budget has made provision for the following:
1. Introducing seven per cent VAT withholding tax on standard rated supplies to improve VAT compliance
2. Rolling out the fiscal electronic devices to facilitate real time monitoring of VAT collections
3. Enforcing the affixing of Excise Tax Stamps on qualifying excisable products such as beers and soft drinks to protect revenue and check smuggling and counterfeiting of such products
4. Abolishing duties on some agricultural produce processing equipment and machinery
5. Reforming customs suspense regime - transit and warehousing – to deal with abuses in the system
6. Extending the two per cent Special Import Levy (SIL) to December 2019 to generate additional revenue for social intervention programmes.
General administrative measures
The 2018 budget also considered some administrative measures that are aimed towards widening the tax net and improving tax compliance. Below are the key measures:
1. Making Tax Clearance Certificates a requirement for significant private contracts to expand the tax net
2. Introducing Voluntary Disclosure Procedures (VDP) and tax amnesty regimes to encourage voluntary compliance
3. Introducing Alternative Dispute Resolution (ADR) for timely resolution of tax disputes
4. Introducing Automatic Exchange of Financial Account Information to curb cross-border evasion
In the next series we will provide our commentary on the expected direct and indirect tax changes, as well as the administrative measures to be implemented as a result of the 2018 Budget Statement. — GB
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