Government announces initiatives to shore up revenue

Accra, Nov. 19, GNA - Mining companies will from next year be requir= ed to pay royalties monthly instead of doing so quarterly, the Government announced on Thursday.

Finance Minister Dr Kwabena Duffuor, who announced this in Parliamen= t during the presentation of the 2011 budget statement and government's economic policy, said the measure was among initiatives being adopted to improve domestic revenue mobilisation.

The theme for the budget is: "Stimulating Growth for Development an= d Job Creation." Some of the initiatives being introduced to enhance revenue include the discontinuation of the deferred payments of VAT, a halt to the practice o= f allowing importers of finished products to warehouse them for up to two years before taxes are assessed on them and an increase in withholding ta= x on foreign supply of services from five to 15 per cent.

The Finance minister said the practice of keeping goods in the warehouses for such long period was not only inconsistent with bonded warehousing regime but also imposed cost on the treasury. He said the bonded warehousing facility would be restricted from now= on to only raw materials for manufacturing as originally intended. On withholding tax, the Minister said, the threshold of the five per=

cent withholding tax would rise from 50 currency points (GH¢50.00) to 5= 00 currency points (GH¢500.00).

The present exemption from withholding tax for compliant taxpayers o= n application would continue and would be improved. He said the current withholding tax of 5 percent, which is applied across board for foreign suppliers of services, made local entrepreneurs who were subject to 25 per cent corporate tax plus all other payroll taxes uncompetitive, especially in the supply of services in the extractive sectors of the economy. "This defeats our goal to enhance local content particularly in the petroleum sector. The withholding tax on foreign supply of services is hereby increased from 5 per cent to 15 per cent and shall be treated as final tax. Dr Duffuor said the government was also proposing to abolish the general five year tax exemption for real estate developers since most of them had abused the essence for which the tax holidays were granted. He said the five years exemption period, which was granted to compan= ies engaged in the construction for letting or sale of residential premises under Act 592 was mainly to create affordable accommodation for the middl= e to low income earners.

"Unfortunately, the real estate developers focused on building for t= he high and upper class of the society while abandoning the original purpose= ," he said. However, Dr Duffuor said given government's heavy involvement with t= he provision of affordable housing, real estate developers who partnered the=

Ministry of Water Resources, Works and Housing to provide affordable hous= es would continue to benefit from the five-year exemption.

Dr Duffuor said the government was extending the APEX Bank tax holid= ay for additional five years to end in 2014 to ensure the proper supervision=

and effective operation of the rural banking system. "We hope this measure will help the APEX Bank to improve its capital=

base, strengthen its credit portfolio to agriculture, and at the same tim= e concentrate on its mandate to service the rural communities," he said.