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March 19, 2021

Ghana issues 2021 Budget Statement and Economic Policy | Tax highlights

Executive summary

On 12 March 2021, Ghana’s Caretaker Minister for Finance (the Caretaker Minister), Honorable Osei Kyei-Mensah-Bonsu, read an abridged version of the 2021 Budget Statement and Economic Policy (the 2021 Budget) in Parliament.

This Alert summarizes the key aspects of the 2021 Budget relating to tax.

Detailed discussion

On 12 March 2021, the Caretaker Minister read in Parliament the 2021 Budget on the authority of Ghana’s President in accordance with Articles 179 and 180 of the 1992 Constitution of Ghana. In the 2021 Budget, the Caretaker Minister announced that, as a result of the negative impact of COVID-19 on the lives of many Ghanaians, it was important for the country to:

  • Rebuild and strengthen its public finances to provide resources and protect the lives and livelihoods of Ghanaians

  • Deliver critical government services and support the transformation of the economy

  • Ensure fiscal and debt sustainability

The Caretaker Minister indicated that the GRA will complete the guidelines and practice notes for the implementation of the voluntary disclosure program and Transfer Pricing Regulations, 2020 (L.I. 2412) which were enacted in 2020.

He added that, to enable the country to rebuild its public finances, the Government must implement important fiscal measures to generate additional domestic revenue. Consequently, the Caretaker Minister outlined the various tax measures to be introduced.

These tax measures include:

COVID-19 Health Levy

The Government has proposed to increase the following taxes by one percentage point:

  • National Health Insurance Levy (i.e., from 2.5% to 3.5%)

  • Value Added Tax Flat Rate (i.e., from 3% to 4%)

According to the Caretaker Minister, these tax increments will provide the requisite resources to sustain the implementation of the measures implemented by the Government to address the COVID-19 pandemic. 

Sanitation and Pollution Levy (SPL)

The introduction of a Sanitation and Pollution Levy (SPL) of 10 pesewas on the price per liter of petrol/diesel under the Energy Sector Levies Act (ESLA), 2015, Act 899. The SPL is expected to provide the Government with the requisite resources to implement measures that will ensure sustainable sanitation management, improve the quality of life and reduce the number of deaths and diseases from poor sanitation.

Energy Sector Recovery Levy (Delta Fund)

The Government has proposed the Energy Sector Levy of 20 pesewas per liter on petrol/ diesel under the ESLA. When petroleum prices increased substantially in 2017 and 2018, the Government abolished the excise taxes on petroleum and reduced the special petroleum tax from 17.5% to 13%. This levy will be instituted to enable the Government to cover the excess capacity charges from the Power Purchase Agreements (PPAs) signed prior to 2017.

Financial Sector Clean-up Levy

The introduction of a levy of 5% on profit-before-tax of banks. This tax is to help defray outstanding commitments in the sector. The levy will, however, be reviewed in 2024.

Tax administration

The Ghana Revenue Authority (GRA) will increase audits and institute measures to recover all outstanding debts and enforce collections in the extractive industry. This, according to the Government, will help curb the unlawful acts by some industry players who are involved in under-reporting and evasion of taxes.

Gaming policy

The Ministry of Finance and the Ministry for the Interior will co-supervise the gaming industry and will soon consult with stakeholders to formulate a comprehensive policy to improve revenue mobilization from this source. This initiative is aimed at eliminating the revenue leakages in the sector.

Road tolls

The Government intends to review the existing road tolls and align them with current market rates. This is to enable the Government to maintain improvements on the roads.

Tax rebate

A proposed rebate of 30% on the income tax due for companies in hotels and restaurants, education, arts and entertainment, and travel and tours for the second, third and fourth quarters of 2021.

 Tax stamps

Suspension of quarterly income tax installment payments for the second, third and fourth quarters of 2021 for small businesses using the income tax stamp system.

Vehicle Income Tax

Suspension of quarterly instalment payments of the Vehicle Income Tax for the second, third and fourth quarters of 2021, for vans (trotros) and taxis as part of measures to reduce the cost of transportation.

Extension of the waiver of interest as incentive for early payment of accumulated tax arrears

A waiver of penalty and interest on accumulated tax arrears up to December 2020 to reduce cash flow challenges for companies and individuals who arrange terms with the GRA to pay the principal in full by September 2021. However, beneficiaries of these reliefs are required to be registered with the GRA and must have fulfilled their first quarter tax obligations.

Independent Tax Appeals Board (ITAB)

The Caretaker Minister stated that the Executive Secretary and members of the ITAB established by the Revenue Administration (Amendment) Act, 2020 (Act 1029) will be appointed in the first half of 2021. 

Voluntary disclosure program and Transfer Pricing Regulations

The Caretaker Minister indicated that the GRA will complete the guidelines and practice notes for the implementation of the voluntary disclosure program and Transfer Pricing Regulations, 2020 (L.I. 2412) which were enacted in 2020.


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

Ernst & Young Advisory Services Limited, Accra

Ernst & Young Société d’Avocats, Pan African Tax – Transfer Pricing Desk, Paris

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

Ernst & Young LLP (United States), Pan African Tax Desk, New York