Parliament last Friday passed the outstanding revenue tax bills which were tabled before it as part of government’s measures to generate more revenue, which remained crucial to completing four of the five agreed Prior Actions in the International Monetary Fund (IMF) Staff Level Agreement.
These bills were the Income Tax (Amendment) Bill, Excise Duty & Excise Tax Stamp (Amendment) Bills as well as the Growth and Sustainability Levy Bill. These bills, according to government, are necessary for effective Budget Implementation as well as boosting the state’s efforts at increasing our Tax-to-GDP from less than 13 percent to the sub-Saharan average of 18 percent.
These Bills, when implemented, will lead to a revenue yield of approximately GH¢3.96 billion. The Growth and Sustainability Levy is expected to raise approximately GH¢2.216 billion in 2023, whereas the Income Tax (Amendment) Bill, 2022 which amends the Income Tax Act, 2015 (Act 896) is expected to yield revenues of approximately GH¢1.29 billion. The Excise Duty (Amendment) Bill, 2022 amends the Excise Duty Act, 2014 (Act 878) and expected to yield approximately GH¢455 million.
By this passage, in addition to the Domestic Debt Exchange Programme (DDEP) – awaiting completion of the external debt operation – government has completed four prior action – Tariff adjustment by the Public Utilities Regulatory Commission (PURC), Publication of the Auditor-General’s Report on COVID-19 Spending, and Onboarding of Ghana Education Trust (GET) Fund (GETFUND), District Assemblies Common Fund (DACF) and Road Fund on the Ghana Integrated Financial Management Information System (GIFMIS) – as agreed in the Staff Level Agreement.
Despite the passage of these revenue bills, especially the Growth and Sustainability Levy and Excise Duty, industry have insisted that this could weaken the sector, specially amid Africa Continental Free Trade Agreement (AfCFTA) implementation.
The Association of Ghana Industry (AGI) and the Food and Beverages Association of Ghana (FABAG) have expressed their opposition to the government’s introduction of the Growth and Sustainability Levy and Excise Duty on beverage companies, stating that the higher taxes would render the industry unsustainable and as well result in the possible closure of businesses.
The General Secretary for the Food and Beverages Association of Ghana, Samuel Aggrey, stated in an interview with the B&FT that the government’s introduction of new taxes or increase of existing taxes is becoming unsustainable for their industry and consumers.
According to him, efforts to engage with the government in 2019 and 2021 to reduce the taxes imposed on the industry have been unsuccessful. Instead, the government continues to introduce new taxes that are becoming unsustainable for businesses and consumers. The high taxes and levies eat up profits and prevent production from reaching full capacity.
“The problem we are facing is that despite our efforts to engage the government since 2019 and 2021 to reduce the taxes imposed on our industry, we have not been successful. Instead, the government continues to introduce new taxes or increase existing ones, which is becoming unsustainable for our industry and consumers. We cannot produce to full capacity due to the high taxes and levies, which eat up our profits,” Mr. Aggrey said.
The Head of Food Sector at the Association of Ghana Industry, Dr. Dominic Quainoo, stated that with this tax, the industry in Ghana wouldn’t be competitive regarding imported substitutes as well as the implementation of the AfCFTA.
“These other products coming from other countries have a lower production cost and our production cost is high and we cannot compete with them. Already we are paying double tax. The levies have been taken out of the VAT as a separate tax going to government. Prices are always going up and as an industry how long can this be sustained,” Dr. Quainoo said.
Growth and Sustainability Levy Bill, 2022
This Bill is to impose a special levy to be known as the Growth and Sustainability Levy to raise revenue for growth and fiscal sustainability of the economy. The Levy is to be imposed on profit before tax of the companies and institutions and on production in the case of mining, upstream oil and gas companies specified in the first column of the Schedule.
Category A companies are required to pay 5 percent of profit before tax under this new amended bill. Companies under this category comprises of banks, non-bank financial institutions, insurance companies, telecommunication companies, breweries, and inspection and valuation companies.
Others are companies providing mining support services, bulk oil distributors, oil marketing companies, communication tower operators companies providing upstream petroleum services, and companies and institutions registered by the Securities and Exchange Commission. Also included are specialised deposit-taking institutions, electronic money issuers, and shipping lines, maritime and airport terminals.
Category B companies made up of mining companies and upstream oil and gas companies, will be required to pay 1 percent of gross production as rate of the levy; while category C, made up of all other entities not falling within category A and B, will be required to pay 2.5 percent of profit before tax.
Income Tax (Amendment) Bill
The Income Tax (Amendment) Bill, 2022 is to amend the Income Tax Act, 2015 (Act 896) to revise the rates of income tax for individuals and introduce an additional income tax bracket, introduce a withholding tax rate on the realisation of assets and liabilities and on winnings from lottery, unify the loss carried forward provisions and revise the treatment of foreign exchange losses and increase the optional rate for individuals on the gain from the realisation of an investment asset, revise the upper limits for the quantification of motor vehicle benefits and increase the concessional income tax rates.
The individual personal income tax bands have been reviewed to accommodate the minimum wage for 2023 as the basic tax-free income and an additional band at 35 percent as part of the high-net-worth taxation policy. The upper limits for quantification of motor vehicle benefits have not been revised since 2015. Government has revised these upper limits to account for inflation.
Excise Duty (Amendment) Bill, 2022
The Excise Duty (Amendment) Bill, 2022, will revise excise tax rates for cigarettes and other tobacco products to conform with the Economic Community of West African States Protocols and raise revenue to mitigate the harmful effects of these excisable products. It also increases excise duty on wine, malt drinks, and spirits and imposes excise duty on sweetened beverages and electronic cigarettes to increase revenue.