Ghanaians who earn GHS10,000 or more will, henceforth, pay 35% of their salary as personal income tax, Finance Minister Ken Ofori-Atta, has said.
He told parliament on Thursday, 19 July during the presentation of the mid-year budget review that government is reviewing the personal income tax categories “to include an additional band of GHS10,000 and above per month at a rate of 35%”.
It is part of the following proposed tax measures announced by Mr Ofori-Atta, through which government intends raking in more revenue:
205. Mr. Speaker, the focus of the government’s economic management is to shift emphasis from taxation to production. This strategy aims at stimulating growth in the private sector to accelerate job creation and prosperity.
206. In 2017, Government reduced the tax burden by more than GH¢1 billion through the abolishing of some taxes and the restructuring of others. Taxes abolished included the 17.5 percent VAT/NHIL on Financial Services and the one percent Import Duty on Spare Parts. Also removed was the VAT on Real Estates, domestic airlines and some imported pharmaceutical products to ease the burden on the National Health Insurance Scheme.
207. In February 2018, government further reduced the Special Petroleum Tax for consumers at a time of rising oil prices on the international market
208. Mr. Speaker, our strategy on revenue mobilisation is to enhance performance by automation of systems, plugging of leakages, improving tax compliance and administration, review of taxes, and change in culture.
209. Government is determined to widen the tax net and to make it fairer, simpler and convenient for citizens to meet the obligation of contributing towards national development.
210. To ensure that government achieves the 2018 revenue targets, we have brought a number of reforms and measures into the tax regime. These initiatives will improve the efficiency of our tax administration, reduce costs and enhance taxpayer services.
Tax Compliance Measures
211. Mr. Speaker, as part of efforts to improve revenue performance, we will intensify tax compliance and plug existing revenue leakages. Investigations we have undertaken show inbound leakages on goods arriving in the country, significant outstanding tax debts, suspense regimes in the area of warehousing, transit trade, and free zones, and tax audit issues such as limited coverage, low auditor productivity, and low audit yields. Mr. Speaker, we are rolling out major initiatives to address these tax compliance issues. Mr. Speaker these initiatives will include prosecutions of tax evaders and corrupt tax officials, a special VAT Attack force to ensure enforcement and deepen VAT penetration from the current low levels of 11 percent, and institutional reforms at GRA.
212. Mr. Speaker tax compliance will also be boosted by the implementation of the Common Platform for Communications Traffic Monitoring, revenue assurance, mobile money monitoring, and fraud management. The Common Platform will provide government with an accurate and comprehensive view of telecom revenues in order to verify tax compliance and to ensure the comprehensive billing and collection of all telecom-related taxes, levies, and regulatory fees.
213. Mr. Speaker, other tax compliance measures that will be vigorously pursued include:
Specialised Audits (Mining, Oil and Gas, Telecommunications Services, Transfer Pricing and High Net Worth Individuals) 214. Mr. Speaker, several billions of Cedis are lost every year due to transfer-mispricing and tax evasion, which leads to a lower than expected Tax-to-GDP ratio.
215. Government will commission audits of local and multinational enterprises in Mining, Oil and Gas, Telecommunications Services, Transfer Pricing and High Net Worth Individuals to address transfer mispricing and other forms of tax evasion.
Prosecution and Enforcement Actions
216. Mr. Speaker, GRA has enhanced its capacity on prosecutions and investigations and will work with relevant state institutions to intensify its investigations and prosecution on non-tax compliant persons.
Issue Audits (Withholding Taxes, VAT, NFSL, Rent Tax)
217. Institutions and businesses are required to withhold and remit to the GRA specified sums from payments made to their suppliers and service providers. Audit conducted revealed that some of these persons have failed to either make the deductions, deduct the correct amounts or remit the sums to GRA. The Authority will intensify audit activities on Withholding Taxes, VAT, NFSL, Rent Tax to ensure compliance.
Broadening the Tax base (Tax Amnesty and Registration for TIN)
218. Mr. Speaker, the campaign to increase Tax Identification Number (TIN) registered persons and encourage the voluntary filing of tax returns commenced in April 2018. Government also announced the general amnesty for taxpayers who would voluntarily register, file returns or pay outstanding arrears. The TIN registration has gone up significantly from an average of 14,000 to almost 100,000 per month and this has helped the Ghana Revenue Authority to consolidate its data on taxpayers. The Tax Amnesty expires at the end of August 2018. The GRA will intensify education to enable as many taxpayers as possible take advantage of this window of opportunity to register and meet their obligations, to avoid prosecution after the deadline. All taxpayers are reminded to take advantage of this amnesty before the deadline.
VAT Monitoring and Deployment of the Electronic Fiscal Device
219. Mr. Speaker, due to under declaration by some suppliers and deliberate nonapplication of the VAT by some registered traders, among others, Ghana’s domestic VAT collection efficiency is low at 28 percent compared to the subSaharan average of 35 percent. As part of measures to improve VAT collection efficiency, the Fiscal Electronic Device Act was passed in March 2018 and implementation of the policy will begin in the fourth quarter of 2018. The GRA has embarked on an intensive monitoring exercise and will soon commence a series of public campaigns to encourage citizens to demand VAT invoices and receipts from suppliers and service providers.
Introduction of Cargo Tracking Note (CTN)
220. Mr. Speaker, experience at the Ports indicates that clearing agents and some importers collude to provide false invoices and manifest leading to huge revenue losses. To remedy this situation, the GRA has since 1st July, 2018 been implementing the Cargo Tracking Note (CTN) system to allow it have access to cargo information for all imports before the vessels arrive in the country. This measure enables GRA to close the information gap between Ghana Customs and trade partners and ensure the correct classification and valuation of all imports. The GRA will intensify this measure to minimize abuse by importers.
Downstream Petroleum Monitoring
221. Mr. Speaker, recent audits by the GRA has established that some Oil Marketing Companies (OMCs) have been under-declaring liftings. The GRA in collaboration with the NPA have developed the use of a common platform to report on oil lifting. With this development it will be possible to detect if the OMCs understate their oil lifting from the depots and tanks. Severe action including imposition of penalties and prosecutions will be initiated to collect all outstanding taxes.
Full implementation of the Excise Tax Stamp policy 222. The Excise Tax Stamp policy came into full effect in January 2018. There have been concerns from manufacturers about the implementation of the policy on ‘high speed’ production lines. Government has addressed those concerns paving way for the full enforcement of the policy.
Use of Electronic systems to identify tax payers and voluntary compliance
223. Mr. Speaker, GRA has commenced the use of big data analytics to identify and register additional taxpayers and through that improve filing rates and revenue receipts. The project is also integrating various data sources to identify recalcitrant taxpayers for compliance and enforcement actions.
224. To improve the ease of doing business in the country, a number of electronic applications are being developed to enable taxpayers conduct business with the GRA online. The online portal for TIN registration is now available for use while contracts for development of simple applications for record keeping and computations of taxes have been awarded. Taxes can be paid through available bank transfer systems and discussions are currently ongoing with Ghana Interbank Payment and Settlement Systems (GhIPSS) for additional electronic platforms for the payment of taxes. This will enable small taxpayers pay their taxes using mobile money. There is also the business process reengineering that one can opt for to change and bring in a lot of changes within the business for the benefit of it.
Tax Policy Measures Luxury Vehicle Levy
225. Mr. Speaker, Government proposes to introduce a luxury vehicle levy on vehicles with engine capacities of 3.0 litres and above. The levy will be paid on first registration and subsequently at annual renewal. Commercial vehicles will be exempted from this policy.
Personal Income Tax
226. Ghana currently has a five (5) band graduated income tax rate for individuals. Government will introduce an additional band to make the rates more equitable in line with best practice.
Health and Education Levy
227. Mr. Speaker, the NHIS exists to ensure that citizens obtain quality health care at all times while the GETFund provides for educational infrastructure.
228. Studies have indicated that current revenue sources do not guarantee the sustainability of the NHIF given that enrolment to the Scheme has increased over the years. The GETFund is also inadequate in the face of an expanding student population and need for additional infrastructure.
229. Mr. Speaker, Government is therefore consolidating contributions to the Health Insurance Fund Levy and the GETFund portion of the VAT into a separate Health and Education Levy. This will enable Government isolate and increase the budget for health and education. Both the Health Insurance Fund and the GETFund levies will continue to be 2.5 percent each, while the applicable VAT rate is 12.5 percent.
General Policy Measures on Payroll
230. Mr. Speaker, as a way to ensure an efficient payroll management system which guarantees cost reduction, quicker payroll processing, data and cost validation, accountability, payment validation and improve overall efficiency, Government is currently evaluating options to outsource the payroll processing for its employees.
231. Mr. Speaker, outsourcing government payroll is aimed at addressing the Public Sector Wage Bill and its crowding out effect on public expenditure. The overall goal is to achieve the convergence criterion of 35 percent wage bill to tax revenue, in the West African Economic and Monetary Union (WAEMU) from the current 48 percent.
Internal Audit Agency
232. Mr. Speaker, the Internal Audit function in the public sector needs to be restructured and strengthened to play its role in the fiscal consolidation efforts of Government. The current law and structure of the Internal Audit Agency (IAA) does not empower it to effectively supervise, manage and regulate the practices of Internal Auditing in the public sector.
233. Mr. Speaker, the following measures are being pursued to restructure and re-engineer the practice of Internal Auditing, to enhance public financial management in Ghana:
• restructure IAA to function as a department of the MoF; and
• the Internal Audit Department will then be the Internal Auditor of Government, with all Internal Audit Units in MDAs and MMDAs directly under its control and management.
This will help to align the activities of Internal Auditing to national financial priorities and strategies set by the Finance Ministry.