Tax laws to be reviewed

Minister of Finance and Economic Planning Seth Terkper has said government will review all tax laws and separate exercise and customs functions to improve efficiency in tax administration and increase government revenue.

As part of the review, five tax bills are expected to be tabled before parliament this year. These are the Revenue Administration Bill, the Value Added Tax (VAT) Bill, the Income Tax Bill, the Customs Bill, and the Excise Bill. “All our tax laws are going to be reviewed; we are in discussions with Parliament. The Income Tax Law was passed in 2000 so it’s over 10 years old; the VAT in 1998, it’s about 15 years old; and the Customs Act is even older.

“We are separating the Excise Service from Customs, and we are bringing in a new Tax Administration Act. So it’s a rebrand of our tax laws, which normally happens in many countries every 10-15 years. We are asking for sufficient parliamentary time to do that,” Mr. Terkper said.

He was speaking last week at the annual post-budget forum organised by tax-advisory firm PwC Ghana in Accra. The yearly event brings together leading business executives and policymakers to deliberate on matters arising from the budget and to make inputs toward achieving the set economic goals.

Ghana’s tax effort has been improving steadily, buoyed by the growing economy and revenue administration reforms, the most significant being the merger in 2009 of the three main tax-collection agencies into the Ghana Revenue Authority.

Government domestic revenue as a share of GDP, which was 17.4 percent in 2010, rose to 20.8 percent in 2011, 21.6 percent in 2012, and is expected to reach 24 percent in 2013. But expenditure, forecast to be 34.4 percent of GDP this year, has been rising more rapidly as government grapples with the huge cost of the Single Spine Salary Policy, expensive subsidies and demands for infrastructure investment.

The main fiscal challenge this year is the deficit, which was 12.1 percent of GDP in 2012 – a level seen as unsustainable for the economy. Mr. Terkper’s 2013 budget promised to narrow the gap to 9 percent of GDP this year, and 8 percent in 2014. Greater expenditure discipline and stronger revenues are seen as critical to achieving the targets.

In 2012, government’s revenue receipts came in below projections due to the failure to realise some taxes planned to be collected from mining, oil and gas companies. Mr.Terkper said to ensure the attainment of 2013 revenue targets, the Ministry of Local Government and Rural Development is implementing a comprehensive street-naming and house-numbering scheme that will ease the identification of taxpayers and their assessment for taxes.

George Kwatia, Mining Industry Leader/Tax Partner of PwC, commenting on this year’s budget, said “the tax proposals in the budget reflect government’s intention to improve internal revenue mobilisation by expanding the tax-base and ensuring efficiency in tax administration.”

Some key proposals and initiatives in the direct tax segment include finalising and passing into law the windfall Tax Bill, which will impose a 10 windfall profit tax on mining companies, and proposals to set off tax credits against liabilities in order to cut back on tax refunds to business.

The budget also proposed an increase in vehicle income tax rates for public commercial transport owners (trotros and taxis), and said the collection of rent taxes will be intensified.

In the direct tax segment, government has proposed increasing the VAT threshold from GHC 90,000 to GHC 120,000, and introducing 3 percent and 6 percent presumptive taxes on business that are not required to register for VAT.