IMF deal: MPs vote on critical revenue bills today

Parliament is expected to vote today on the Income Tax (Amendment) Bill, Excise Duty and Excise Tax Stamp (Amendment) Bills as well as the Growth and Sustainability Levy Bill.

Passage will facilitate IMF Executive Board approval

Approval of these outstanding revenue mobilisation bills will facilitate the approval of $3 billion International Monetary Fund (IMF) Programme staff level agreement by the Executive Board of the Fund.

Passage to increase Tax-to-GDP from 13% to 18%

The  passage of all the outstanding revenue bills which are necessary for effective budget implementation as well as boosting efforts at increasing Tax-to- Gross Domestic Product (GDP) from less than 13% to the sub-Saharan average of 18%.

4^th agreed Prior Actions in the Staff Level Agreement

The passage of the bills will enable government to complete four out of five agreed Prior Actions in the Staff Level Agreement.

3 agreed Prior Actions in the Staff Level Agreement fulfilled

Already, government has completed tariff adjustment by the Public Utilities Regulatory Commission (PURC), Publication of the Auditor-General’s Report on COVID-19 spending, as well as onboarding of Ghana Education Trust Fund (GETFund), District Assemblies Common Fund (DACF) and Road Fund on the Ghana integrated financial management information system (GIFMIS).

No access to international capital market

The international and domestic bond markets are shut for the financing of government’s programmes, forcing government to rely on the Treasury Bills and concessional loans as the primary sources of financing for the 2023 fiscal year.

Bills critical for recovery from current economic crisis

Therefore, consideration and approval of fiscal measures by Parliament are critical for recovery from the current economic crisis.

Fiscal sustainability of economy

Director of Revenue Policy Division of the Ministry of Finance George Swanzy Winful, explained that the Growth and Sustainability Levy is to raise revenue for growth and fiscal sustainability of the economy.

Bridging financing gap 

This, he said, was necessary to bridge the financing gap created by COVID-19 and Russia-Ukraine war.

Growth and Sustainability Levy to apply from 2023 to 2025

He hinted that Growth and Sustainability Levy is a temporal measure expected to apply from 2023 to 2025 to help correct the imbalances being experienced.

Replacement for National Fiscal Stabilisation Levy

Mr Winful explained that Growth and Sustainability Levy replaces the National Fiscal Stabilisation Levy (NFSL).

According to him, the National Fiscal Stabilisation Levy (NFSL) was being charged on 11 companies but the Growth and Sustainability Levy will apply to all companies.

Serious consequences of not passing the bills

He cautioned that if the bills are not passed, government will be forced to review revenue estimates which will have serious consequences on public funds.

The Director of Revenue Policy Division of Ministry of Finance explained that government has indicated revenue mobilization plans to IMF which includes the outstanding bills.

Therefore, he said failure to pass the bills will exacerbate an already difficult financial position of the country

He pointed out that the country is in extra ordinary times and appealed to the Members of Parliament to pass the outstanding bills today.

Mr Winful pledged that the Ministry of Finance will deepen stakeholder engagements to address concerns of the public.

Income Tax (Amendment) Bill, 2022

The object of 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.

It will 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.

The Bill will also 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% 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 therefore revised these upper limits to account for inflation.

Compliance with the requirements for payment of tax on realisation of assets and liabilities is being made more efficient with the introduction of a return to be submitted within 30 days of the realisation and a withholding tax.

The optional tax rate for individuals on the gain from realisations has also been increased.

The rate for income from gifts will also be increased as a consequential amendment.

The loss carried forward provisions are being unified at five percent while the treatment of foreign exchange gains is being restricted to actual losses.

Foreign exchange losses relating to capital expenditure is also to be capitalised.

The income tax rates for temporary concessions are being reviewed upwards with the intent to gradually phase them out.

These amendments are considered necessary to support the growing economy and will lead to a revenue yield of approximately GH₵1.290 billion.

Excise Duty (Amendment) Bill, 2022

The object of the Excise Duty (Amendment) Bill, 2022 is to amend the Excise Duty Act, 2014 (Act 878) to revise the excise tax rates for cigarettes and other tobacco products to conform with the Economic Community of West African States (ECOWAS) Protocols and raise revenue to mitigate the harmful effects of these excisable products.

The Bill will increase the excise duty in respect of wine, malt drinks and spirits; and impose excise duty on sweetened beverages and electronic cigarettes and electronic liquids to increase revenue.

The ECOWAS directive on the harmonisation of excise duties on tobacco products directs that the excise duty on tobacco products must include an ad valorem duty and a specific duty.

Specifically, the ad valorem rate is required to be 50% or more while the specific tax is required to be the minimum equivalent of $0.02 per stick in the case of cigarette, cigar and cigarillo and the cedi equivalent of $20 per net kilogramme for all other tobacco products.

The Bill also seeks to amend Act 878 to implement this Directive in line with Ghana being a member of ECOWAS.

There has been an increase in the use of electronic cigarettes and other smoking devices over the last decade.

Currently, these products do not attract excise duty, but Excise duty will be imposed on these products as the nicotine and other chemicals used as additives are also harmful.

Apart from mineral waters and malt drinks, all other sweetened beverages, including processed fruit juices do not attract excise duty.

The Bill amends Act 878 to impose excise duties on these products and increase the excise duty on mineral waters and malt drinks.

Spirits have a higher alcohol content compared to beer but the excise duty on spirits is lower than that of beer.

To address this, the excise duty on spirits is being raised above that of beer in accordance with good practice on the imposition of excise duties.

Consequentially, the excise duty on wines has been reviewed upwards.

For ease of reference and the record, the descriptions of the various products are being revised to conform to the World Customs Organisation Harmonised Commodity Description and Coding System.

The Bill amends Act 878 by substituting the First Schedule with a new Schedule.

The rationale for the amendment is to revise the excise tax rates for cigarettes and other tobacco products to align with the ECOWAS Protocols and impose new excise tax rates on sweetened beverages.

The passage of the Bill will yield approximately GH₵450 million.

Growth and Sustainability Levy

The object of the 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 Coronavirus Disease (COVID-19) pandemic led to a significant reduction in revenues and increased expenditure enormously.

The double jeopardy of the Russian-Ukraine war has also resulted in unprecedented global crises, depreciation in currencies and impacted living conditions and inflation levels.

The Ghanaian economy has not been spared these shocks.

Further interventions are required to raise additional revenue for national development and social protection for the vulnerable.

The introduction of the Growth and Sustainability Levy is part of Government’s efforts to raise funds for carrying out these interventions.

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.

The estimated revenue for 2023 is approximately GH₵2.216 billion.

The Levy is subject to review by the Minister responsible for Finance in 2025.