On Monday 5th December 2022, Government launched the Ghana Domestic Debt Exchange Programme (DDEP) as part of a broader response to recent macroeconomic challenges.

At that time, it was indicated that the Debt Exchange Programme had been informed by the Debt Sustainability Analysis which revealed that Ghana’s public debt had become unsustainable, and that, debt servicing accounted for more than half of total government revenues and almost 70% of tax revenues, while total public debt stock, including that of State-Owned Enterprises and statutory funds, exceeded 100% of our GDP. The essence of the debt exchange was indicated as, to help restore Ghana’s capacity to service its debt and meet other expenditure obligations.

I will end the literature on the DDEP here and seek to provide answers to various questions and calls I have received from friends and my readership to do a write up on the tax implications of the DDEP. This article is to discuss the tax implications on the DDEP, proffer my opinion, and provide some recommendations to guide the readership.

The focus of the article will be on what will be the tax implications on taxpayers on losses they will incur as a result of the DDEP on their business.


Reference will be made from the Income Tax Act 2015, (Act 896) as amended, and the Revenue Administration Act 2016, (Act 915) as amended.

a) Are financial losses incurred on financial instruments due to the DDEP tax deductible?

The answer to this question can be found in section 25 and 131 of Act 896. Section 25 of Act 896 states that this section applies where, under the rules in Divisions II or IV of Part II, a person is required to include an amount or may deduct an amount in relation to a Financial Instrument in calculating income from a business or investment.

The determination of the time at which an amount is to be included or deducted, the person to whom the amount shall be allocated, the quantum of the amount, and the character of the amount shall be in accordance with Generally Accepted Accounting Principles.

It goes further to emphasise that; the generally accepted accounting principles apply even if the application of the principles requires the inclusion or deduction of an amount on a Fair Value accounting basis irrespective of the other provisions of this Division, whether or not the amounts have been derived, incurred, or realised; and whether or not the amount is of a capital or revenue nature.

Bonds constitute financial instrument as defined in section131 (1)(a)(i) as, in this Act, unless the context otherwise requires,

“financial instrument” means a debt claim or debt obligation, with a debt claim and debt obligation defined by subsection 2 (a) and (b) as “debt claim” means a right to receive a payment under a debt obligation whilst “debt obligation” means an obligation to make a payment to another person that is denominated in money and is in the nature of accounts payable and the obligations arising under deposits, debentures, stocks, shares, treasury bills, promissory notes, bills of exchange and bonds.

From the above analysis, I can answer the question that “YES”, losses incurred by business on their financial instruments under the DDEP are tax deductible.

b) Pointers to note in taking deduction for financial cost (losses)

Section 131(3) (b) of Act 896 states that for the purposes of this Act, a person incurs a financial cost when the person incurs losses with respect to a financial instrument. Although it has been established above that financial cost is tax deductible care should be exercised in taking such deduction since there is a limitation on the amount of financial cost a person can take as deduction at a time.

Section 16 (1) of Act 896 states that, the amount of financial cost other than interest deducted in calculating the income of a person from an investment or a business conducted for a year of assessment shall not exceed the sum of a financial gain derived by the person that is to be included in calculating the income of the person from the investment or business for the year of assessment; and fifty percent of the income of the person for the year from the business or investment calculated without including a financial gain derived by the person, or deducting a financial cost incurred by the person.

A financial cost for which a deduction is denied as a result of the rule above may be carried forward in the order in which it is incurred and treated as incurred during any of the following five years of assessment, but only to the extent of an unused limitation in the above for the year.

c) The ruling by the CG to Ghana Association of Bankers (GAB) on the Tax implications of the DDEP

Questions have been posed to me on a response from the CG to GAB in response to an application made to the CG by GAB seeking guidance on tax implications of the DDEP and some reliefs for its members as a result of the effects of the DDEP. I must acknowledge that I have not sighted the application except the response given by the CG and my comments will be based on the response.

In all likeness, I think I will not be far from the truth to take the CG’s response as a “Class Ruling” of some sort although the letter did not specifically indicate that it is a class ruling. The response numbered five in the letter has been reproduced below.

“Request to allow as deductible, losses directly attributable to the DDEP

Apart from section 17 of Income Tax Act, 2015 (Act 896) and Regulation 19 of LI 2244 which relate to the carrying forward of unrelieved losses, there is no other provisions in the Income Tax law which gives the CG the mandate to allow as deductible losses, losses specifically and directly attributed to the DDEP. Your only recourse will therefore be to seek an amendment to the Income Tax Act to that effect, through the Ministry of Finance which has oversight responsibility over GRA”.

I am of the opinion that the answer provided by the CG above, satisfies the request which was presented to the CG by GAB although that might not be what was intended by GAB. Are the losses in reference to tax losses of members of GAB which are directly attributable to the DDEP, if yes, then section 17 of Act 896 and regulation 19 of L.I. 2244 answers the request perfectly. But if that was not what GAB intend to ask, then GAB’s request should have been stated as “request to allow as deductible expense, financial cost incurred by its members directly attributable to the DDEP”.

d) On the issue of how to reconcile the response of the CG

Some practitioners are of the opinion that GAB should write to the CG again to seek guidance or challenge his response to the fifth point in his letter to GAB. I am of the opinion that such a measure is not necessary, because the CG’s response is not a law and assuming it constitute a class ruling which I am comfortable to classify as such, section 103 of the Revenue Administration Act, 2016 (Act 915) talks about class ruling and its effects on taxpayers. Subsection 1 (b) states that subject to section 104, the CG may, on an application in writing by a person, issue to that person a private ruling or a class ruling setting out the position of the CG regarding the application of a tax law with respect to an arrangement proposed or entered into in the case of a class ruling, by persons in a specified class.

Subsection (3) states that subject to subsection (4), a private or class ruling is binding on the CG with respect to the application of a tax law mentioned in the ruling to an arrangement of a person in the specified class, in the case of a class ruling. Subsection (4) states that a private or class ruling under subsection (1) is binding only if prior to the issuance of the ruling, the applicant makes a full and true disclosure of all aspects of the arrangement relevant to the ruling to the CG and the arrangement proceeds in all material respects as described in the application for the ruling, if the ruling is headed “private ruling” or “class ruling” as the case requires, and for the period specified in the ruling.

Subsection (5) is clear that upon satisfaction of subsection (4), a private or class ruling DOES NOT BIND the applicant or any other person or the CG with respect to any person other than, in the case of a private ruling, the applicant or, in the case of a class ruling, persons in the specified class.

Subsection (6) has clearly stated that a private or class ruling is NOT SUBJECT TO CHALLENGE, but a person may challenge a tax decision made with respect to an arrangement which is the subject of a private or class ruling.

So, if GAB or any member of GAB believes that they hold different opinion to the response given by the CG in his letter as I have tried to analyse in this article, such a member can just ignore the response given by the CG to point number five in the letter and apply the tax laws as they believe.

2. Conclusion

In conclusion, based on the review of the relevant sections of the applicable law above, I conclude that financial cost of taxpayers arising from the fair valuation of their financial assets as a result of the DDEP, is a legitimate tax-deductible expense upon the satisfaction of sections 16, 25, and 131 of the Income Tax Act, 2015 (Act 896) as amended. Taxpayers are to note that it is actual losses which will qualify for the tax deduction but provision for such losses will be disallowed.

3. Recommendations

I recommend that members of GAB, other financial institutions, and any businesses which are impacted by the DDEP speak to their tax advisors for guidance on how to navigate the waters. My channels of communication are opened for any further engagement on this article.