Ghana presents 2019 Budget Statement and Economic Policy

On 15 November 2018, Ghana’s Minister for Finance and Economic Planning, Mr. Ken Ofori-Attah, presented the 2019 Budget Statement and Economic Policy to the Parliament.

The key aspects of the Policy relating to tax, according to the Minister, are summarized below.

1. The Government intends to revive the textile industry which has recently faced counterfeiting and smuggling. In order to achieve this, the Government will extend the tax stamp policy (introduced this year) to textile products. Additionally, to make the industry price-competitive, the Government will zero-rate value added tax (VAT) on the supply of locally made textiles for a period of three years.
2. The Government will work with the Ministry of Energy to introduce tax-free solutions for Full Electrical Vehicles in order to promote a technology shift from fossil fuel based vehicles, which is a major global source of climate change gasses, and from diesel vehicles which is a significant source of local air pollution and poses significant health challenges.
3. The Government expects the citizenry to contribute by registering for tax identification numbers (TIN), paying their taxes, keeping the environment clean, and reducing waste. The Government intends, through these policies, to broaden the tax net and simplify the payment of taxes through different routes under the guidance of the Ghana Revenue Authority (GRA); eliminate the payment for government services with cash - requiring that citizens show their TIN before accessing social services like free health care under the National Health Insurance Scheme, Free Senior High School and other services like vehicle licensing and registration, passport services, banking services as well as mobile money services.
4. The Government proposes, after listening to public feedback, to review the individual income tax band to require monthly taxable individual income in excess of GHS20,000 to be taxed at the rate of 30% and to waive taxes on same up to the minimum wage level to lighten the tax burden on wage earners. In view of this, new tax bands are expected to be introduced in 2019 to reflect the above changes.
5. The Government intends to shift the collection of withholding tax on small scale mining businesses to the point of export to simplify the collection of the tax.
6. The Government intends to retool the GRA for the critical task of mobilizing revenue to finance improvement in the lives of people. The Government will achieve this by making changes to the management and personnel of the GRA. It is expected that this will help to boost the performance, responsiveness and ethics of the entire GRA workforce.
7. The Government intends to intensify tax compliance measures by prosecuting persons who commit tax crimes such as deliberate undervaluation of import values, the ex-warehousing of imports from bonded warehouses without prior payment of custom taxes, the suppression of sales, and the non-issuance of VAT receipts for registered businesses, among others. This will also include prosecution of revenue officials who collude with tax officers to carry out criminal activities leading to revenue leakages and irregularities.
8. The Government will use various distress measures to institute legal action against large tax defaulters. The Government has already prepared the file to commence proceedings to prosecute offenders. The Government will speed up the implementation of various automated systems to reduce human involvement in tax administration. This will include the use of electronic devices to deepen VAT penetration, the Excise Tax Stamp Policy, the harmonization of automated systems at the ports of entry, and other key systems the implementation of which will be intensified in 2019.
9. To improve compliance measures in the mining industry, the Government will adopt the following strategies:
   • Ensure greater scrutiny of the quantity and quality of minerals produced in Ghana as the basis for revenue determination and export valuation
   • Curb base erosion as the basis and source of systematic undervaluation of royalties and profits
   • Tighten the regime that governs foreign exchange repatriation through the Bank of Ghana
   • Capitalize tax expenditures (exemptions) and recognize them as additional government equity holdings in the mining companies
   • Revitalize the Inter-Agency Technical Committee on mining
10. To broaden the tax base:
    • The Government will apply sanctions to state and private entities failing to enforce the TIN requirement as provided in the Revenue Administration Act, 2016, Act 915. The Revenue Administration Act lists many services that cannot be accessed without a TIN. The Government will require beneficiaries or their guardians to have a TIN in providing social services and benefits to them.
    • The Government will use third-party data sitting in various databases in both private and public sector organizations such as the Driver Vehicle and Licensing Authority (DVLA), Lands Registry, the Courts, Financial Institutions, Law Enforcement Agencies, Social Security and National Insurance Trust (SSNIT) for tax administration purposes and to include more persons into the tax base.
11. The Government is undertaking measures to reform the tax exemption regime and for that purpose, a draft policy has been completed and will be forwarded to Parliament during 2019 to be passed into law. According to the Minister, research conducted showed that the reliefs are unsustainable and the benefits that Ghana derives from these exemptions and reliefs are doubtful.

For additional information with respect to this Alert, please contact the following:

Ernst & Young Ghana, Accra

• Robin McCone | robin.mccone@gh.ey.com
• Isaac Sarpong | isaac.sarpong@gh.ey.com

Ernst & Young Advisory Services (Pty) Ltd., Africa ITS Leader, Johannesburg

• Marius Leivestad | marius.leivestad@za.ey.com

Ernst & Young LLP (United Kingdom), Pan African Tax Desk, London

• Rendani Neluvhalani | rendani.mabel.neluvhalani@uk.ey.com
• Byron Thomas | bthomas4@uk.ey.com

Ernst & Young LLP, Pan African Tax Desk, New York

• Dele A. Olaogun | dele.olaogun@ey.com

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