Governor of the Bank of Ghana (BoG) Dr Ernest Addison has appealed to Parliament to pass the outstanding revenue mobilization bills before adjourning sitting sine dire this Friday.
According to him, the passage of the relevant revenue bills will conclude the required prior actions agreed in the Staff-Level agreement to advance Ghana’s $3 billion programme to the IMF Executive Board for the country to ease its current economic difficulties.
The bills are the Income Tax (Amendment) Bill, Excise Duty and Excise Tax Stamp (Amendment) Bills as well as the Growth and Sustainability Levy Bill.
GH₵4bn revenue targeted
Cumulatively, the bills are expected to rake in GH₵4 billion annually. However, this target will be missed this year as the bills are yet to be passed while the first quarter ends in two days.
Passage will facilitate IMF Executive Board approval
Approval of these outstanding revenue mobilisation bills is critical to facilitating the approval of $3 billion IMF Programme staff level agreement by the Executive Board of the Fund.
2023 budget sets fiscal policy on consolidation path
Addressing the Monetary Policy Committee (MPC) Meeting in Accra, Dr. Addison noted that the budget statement for 2023 has set fiscal policy on a consolidation path which is consistent with key elements agreed with the IMF at the Staff Level in December 2022.
Significant reduction of debt service, creating fiscal space
According to him, the domestic debt exchange, new revenue measures, and structural fiscal reforms will provide significant reduction of debt service and help create fiscal space.
Fiscal outlook is contingent on financing the budget
He pointed out that the fiscal outlook is contingent on financing of the budget and will require the conclusion of the domestic debt exchange programme as well as securing the requisite financing assurances from bilateral donors saying indications are that these discussions are proceeding well.
Based on the above, he said it is imperative that Parliament prioritizes the passage of the revenue bills currently before it.
Zero financing of budget to be signed soon
The Central Bank Governor said under the Staff Level Agreement with the IMF, BoG and the Ministry of Finance have finalised a Memorandum of Understanding (MoU) on zero financing to the budget, which will be signed soon.
Resetting the economy on the path of recovery
Dr. Addison is hopeful that the measures will be critical in resetting the economy on the path of recovery, including putting it firmly on a disinflation path and sustained growth
Factors that adversely affected Ghana’s macroeconomy
The COVID-19 pandemic, rising global food prices, rising crude oil and energy prices; and the Russia-Ukraine war adversely affected Ghana’s macroeconomy, with spillovers to the financial sector.
Combination of adverse external shocks
The combination of adverse external shocks had exposed Ghana to a surge in inflation, a large exchange rate depreciation and stress on the financing of the budget, which taken together have put public debt on an unsustainable path.
$54bn total public debt stock
Ghana’s total public debt stock stands at $54 billion, out of which $28 billion is owed to foreign creditors.
Ghana owes China $1.9bn
Out of Ghana’s $8.5 billion bilateral loans, about $1.9 billion is owed to China.
$3bn staff-level agreement reached in December 2022
In December 2022, the government reached a staff-level agreement with the fund and is now left with board-level approval before it can access the $3 billion support.
Ghana seeking extension of maturities, debt servicing, lower interest rates
Information indicates that Ghana is seeking among other reliefs, an extension of the moratorium on debt servicing; an extension of maturities; and lower interest rates.
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%.
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.
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.