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November 19, 2021
2021-2123

Ghana issues Budget Statement and Economic Policy for 2022 Financial Year

Executive summary

On 17 November 2021, Ghana’s Minister for Finance and Economic Planning (the Minister), Honorable Ken Ofori-Atta, read the 2022 Budget Statement and Economic Policy (the 2022 Budget) in Parliament.

This Alert summarizes the key aspects of the 2022 Budget relating to tax.

Detailed discussion

The 2022 Budget was presented to Parliament by the Minister on the authority of Ghana’s President in accordance with Articles 179 and 180 of the 1992 Constitution of Ghana.

The theme of the Budget was dubbed; "Building a sustainable entrepreneurial nation: Fiscal Consolidation and Job Creation."

The Minister stated that the Government was seeking to maintain a good balance between implementation of the revitalization and transformation program and fiscal consolidation to promote growth within a macro-economic environment. The Minister also said that the 2022 Budget aims at providing a supportive private environment for domestic businesses and foreign direct investments to prosper.

The Minister stated the following tax measures in the 2022 Budget:

  • Ghana’s Model Double Taxation Agreement will be reviewed and updated to bring it to terms with current legislation and international developments.

  • The Customs Tariff will be updated with the 2022 version of the Harmonized Commodity Description and Coding System (HS Code).

  • The Government will conduct revenue assurance in the year 2022 to verify the compliance level of employers regarding employment (PAYE) taxes. Additionally, revenue assurance measures will be performed on service taxes collected by commercial entities.

  • The Government will pay closer attention to persons engaged in mining of salt as part of the broader mining sector. Further, the Government will partner with the private sector to introduce digital systems to monitor their activities and provide revenue assurance.

  • Ghana Revenue Authority (GRA) dedicated desks in outfield offices will be set up to address issues relating to professionals and in furtherance of matching taxpayer data across several platforms.

  • Advanced Cargo Manifest and Advanced Passenger Information (APIS) will be introduced as well as a self-clearance system where individuals can make direct application for clearance of imports without the services of a Customs House Agent.

  • The Government will extend the duration of value added tax (VAT) relief to local textile manufacturers for an additional two years (2022 to 2023) to consolidate the gains achieved from introducing the relief and drive expansion of the industry.

  • The Government will review the existing VAT Flat rate scheme in the year 2022. Thus, the VAT Flat rate scheme of 3% will be restricted to retailers of goods with annual turnover of GHS200,000 to GHS500,000. Currently, the VAT Flat rate of 3% applies to both wholesalers and retailers of goods. According to the Minister, this policy is intended to address the inequalities that domestic producers of local substitute face vis-à-vis importers of similar products. Wholesalers of goods will now be required to charge and account for VAT at the standard rate of 12.5%.

  • The temporary benchmark discount on certain imported goods and vehicles will be reviewed to ensure that the policy aligns with current development needs to protect the environment, local industry, strengthen public safety and support public health.

  • The GRA will intensify the Revenue Assurance and Compliance Enforcement (RACE) initiative to plug revenue leakages.

  • The GRA intends to implement the modified tax system which was introduced in 2015 to provide a simplified system of tax compliance for the informal sector and small-scale businesses. The Government will consider increasing the revenue threshold upwards from GHS200,000 to GHS500,000 under the modified tax system. This policy is aimed at expanding the tax net, making tax payment simpler, improving compliance, and enhancing the contribution of persons in this tax category to total tax revenue.

  • The withholding tax rate applicable to the sale of unprocessed gold will be reduced from 3% to 1.5% to improve compliance and boost the export of unprocessed gold by small scale miners.

  • The Government through the GRA will from January 2022, assist Metropolitan, Municipal and District Assemblies (MMDAs) to implement a common platform for property rate administration to enhance property rate collections and its accountability.

  • The Government will review the fees and charges of MMDAs for implementation from 1 January 2022 and then every five years. Subject to the consent of the Minister, the revision of the fees and charges will be consistent with the annual average inflation rate announced by the Ghana Statistical Service.

  • Road tolls on all public roads and bridges will be zero-rated effective from the date of approval of the 2022 Budget to ensure free vehicular movement, improve productivity and reduce environmental pollution caused by emissions from vehicles around tolling points.

  • The Government will introduce the Electronic Transaction Levy (E-Levy) at the rate of 1.75% to be charged on all electronic transactions covering mobile money payments, bank transfers, merchant payments and inward remittances. The Levy will be borne by the sender except inbound remittances which will be borne by the recipient. Further, transactions adding up to GHS100 or less per day or GHS3,000 (approximately) in a month shall be exempt from the Levy. The Levy will be implemented on 1 February 2022, consequently, the industry members are expected to configure their systems to implement the policy by the appointed time.

  • Government will present the revised (Tax) Exemption Bill to Parliament for its passage into law in the year 2022. The Exemption Bill seeks to rationalize the current exemptions dispensation by varying or limiting the scope, where necessary, and consolidating the existing statutory provisions on exemptions, among others.

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

Ernst & Young Chartered Accountants, 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

 

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