Introduction

As stated in Articles 179 and 180 of the 1992 Constitution of the Republic of Ghana, the Executive is required to present an account of the management of the economy for 2023 and a budget statement for the 2024 financial year to the Legislature for approval. The Budget Statement and Economic Policy of the government for 2024 was presented by the executive on 15th November 2023.

The budget statement serves as the Financial Policy of the Government of Ghana which directs the financial and economic activities in the country.

From the budget statement, the government gave an account of revenue generated and expenditures made up to the September 2023 financial year and made projections on revenue to be generated for 2024 and estimated expenditures to be incurred for 2024.

Among the projected sources of revenue for the government is taxation. The government has made various proposals on taxation in the 2024 budget. This article is to provide highlights of tax issues raised in the 2024 budget statement and proffer my opinion on some topical tax issues in the budget which can inform authorities in their approach to implementation and legislation formulation.

1) Highlights of Tax Issues in the 2024 Budget Statement

Below are highlights of tax issues in the 2024 budget statement:

a) Implementation of measures to improve the VAT regime

Notwithstanding the efforts made by the government so far, there still exists a significant VAT gap that needs to be urgently addressed to improve revenue performance. In this respect, the following measures will be put in place:

i. The commissioner-general's certified invoice will be the basis for all deductible expenses for income tax purposes;

ii. the second phase of the electronic invoicing system (e-VAT) covering six hundred large taxpayers and more than two thousand small and medium taxpayers will be implemented;

iii. the implementation of the upfront VAT on imports of Vatable goods by unregistered importers will continue;

iv. A VAT flat rate of 5 percent will be introduced to replace the 15 percent standard VAT rate on all commercial properties to simplify administration and enhance revenue mobilisation; and

v. some VAT exemptions will also be reviewed to reduce distortions and abuses in the system.

b) Property rates administration

The property rate reform project was introduced in 2023 with the objective of developing a unified common platform capable of billing, collecting, and reporting property rates nationwide. The initiative achieved some success, but some
implementation challenges still exist making it difficult for the relevant bodies including the Metropolitan, Municipal and District Assemblies (MMDAs) to have access to their share of the property rate collections on time. This has prompted the suspension of the project and in the interim, MMDAs will resume collection until these challenges are resolved.

c) Tax relief

The various tax reliefs were proposed to ameliorate some burdens from some industries and taxpayers:

i.Extension of zero rating of VAT on locally manufactured African prints for two (2) more years;

ii. Waiver of import duties on import of Electric Vehicles (EVs) for public transportation for a period of 8 years;

iii. Waiver of import duties on Semi-Knocked Down (SKD), Completely Knocked Down (CKD), and Fully-Built Units (FBU) of EVs imported by registered EV assembly companies in Ghana for a period of 8 years;

iv. Extension of zero rating of VAT on locally assembled vehicles for 2 more years:

v. Zero rating of VAT on locally produced sanitary pads;

vi. Granting of import duty waivers for raw materials for the local manufacture of sanitary pads;

vii. Granting of exemptions on the importation of agricultural machinery, equipment and inputs and medical consumables, raw materials for the pharmaceutical industry;

d) Extension of the scope of environmental excise duty

To address the negative externalities of plastic waste and pollution, the government will review and expand the Environmental Excise Duty to cover plastic packaging and industrial and vehicle emissions.

e) Revision in the stamp duty rates

To realign the stamp duty rates with current economic realities, the rates and fees for stamp duties will be revised to reflect the current economic realities. The bands subject to ad valorem taxes will be expanded while the specific rates will be reviewed upwards.

f) Implementation of a modified taxation scheme for individuals in the informal sector

A simplified tax return will be introduced as a means of promoting voluntary compliance as part of the modified taxation scheme for individuals in the informal sector. This approach will make it easier for taxpayers to fulfil their tax obligations to the State.

g) The tax-free portion of the individual income tax rates to be realigned with the agreed minimum wage

The Tripartite Committee has concluded negotiations on the National Daily Minimum Wage. The tax-free portion of the Individual Income Tax rates will accordingly be adjusted to take care of the change.

h) Waivers of import duties on vehicles to Doctors

The government recognises the constraints our medical personnel face in providing health care for our citizens. With the passage of the Exemptions Act, the government will engage the Ghana Medical Association on waivers for the importation of vehicles to ease the transportation burden of our doctors. This policy will enable them to deliver quality and timely healthcare.

i) The implementation of the Communications Service Tax (CST)

The implementation of the Communications Service Tax (CST) is being carried out in phases. The first phase currently under implementation covers 14 entities, including pay-per-view television stations. Engagements with stakeholders for the implementation of the second phase have begun and their onboarding will be carried out in 2024.

j) Revision in the excise duties rates on beer and expand the scope of the Environmental Excise Duty

In efforts to attempt to address negative externalities, which cause some distortions in the application of the excise policy. The application of different excise rates for beer is inconsistent with the intended policy. Similarly, environmental excise duty does not cover plastic packaging and plastics which are also harmful to the environment.

Furthermore, industrial and vehicle emissions continue to pose a danger to the environment. To correct these anomalies, the government will review the excise rate on beer and expand the Environmental Excise Duty to cover plastic packaging; and industrial and vehicle emissions.

k) Harmonisation of the VAT Act and Customs legislation

Due to a mismatch in VAT and Customs legislations, there are some products which attract VAT locally while these same products do not attract VAT when imported. This distortion has made it more attractive to import the affected products rather than manufacture them locally. To correct this, the two enactments will be aligned to ensure that similar products attract the same tax.

l) Government to sign bilateral agreements with its major trading countries to boost the exchange of information on Customs

Ghana, in 2015, joined the global efforts to combat illicit financial flows to tackle tax evasion and avoidance schemes. Towards this objective, and to address the current revenue gap, the government will sign bilateral agreements with its major trading countries to boost the exchange of information in the area of Customs operations. In the same light, the Special Voluntary Disclosure Programme will be operationalised by the Ghana Revenue Authority in 2024. These measures will go a long way to deter non-compliance, tackle tax evasion, and ensure tax transparency

2) My Opinion

Generally, I am satisfied with the tax measures proposed in the budget because it does not seek to introduce new taxes or increase existing tax rates as a means of increasing tax revenues but it seeks innovative ways to enforce existing tax laws to widen the tax net by roping in all legible taxpayers who are not known to the tax systems.

As much as I am happy for the enforcement of existing tax laws, such enforcement must be carried out within the confines of the laws to ensure equity and fairness to all stakeholders, especially to the taxpayers.

My opinion on some of the tax measures in the 2024 budget statement has been outlined below:

My Opinion: The implementation of measures to improve the VAT regime is a laudable idea especially the implementation of the electronic VAT invoicing system to ensure real-time monitoring of transactions for revenue assurance purposes. I however have misgivings on the implementation of the decision to only accept the Commissioner-General’s certified invoice as the basis for allowing deductible expenses for income tax purposes.

If my memory serves me right, this particular issue came up in September 2021 and I did a publication on it on 29th September 2021 (a link to the publication is insert: https://thebftonline.com/2021/09/29/enforcement-of-the-vat-act-is-the-directive-on-the-vat-invoice-the-panacea/ ).

From where I sit, the very issues I raised in that publication, two years ago still persist and I will come to the same conclusion and provide the same recommendations. For this policy to be successful, I am of the opinion that sections 2, 8, and 9 of the Income Tax Act, 2015 (Act 896) as amended and sections 1, 4, 5, 6, and 41 of the Value Added Tax Act, 2013 (Act 870) as amended.

Without an amendment to any of these identified sections in the two legislations before the implementation of this policy, it’s likely that the policy will face disagreements from taxpayers as the policy will not be in sync with the identified provisions.

I will do a comprehensive write-up on an approach I believe will be worth thinking through by policymakers in our efforts to get tax evaders into the tax net without unduly punishing the law-abiding taxpayers.

My Opinion: I am satisfied with most of the other proposed tax policies because they generally seek to support local agriculture and manufacturing by granting an exemption on import duties and zero-rating VAT on their outputs.

These measures will go a long way to reduce the cost of the outputs of these industries notably the cost of sanitary pads, locally manufactured textiles print, agricultural produce, and locally manufactured or assembled vehicles including EVs and the like.

It’s expected that these measures will have consequential reductions on the prices of the end products to the ordinary Ghanaian to ameliorate the harsh economic conditions in the country.

3) Recommendations

I recommend a holistic and broader consultation of stakeholders on the best way to implement the VAT act without breaching Acts 896 and 870 or any other Act. I call on all professionals especially my Senior Tax Practitioners to express their opinions and advise the Government on the best way to operationalise these laudable policies to the benefit of mother Ghana.

I will conduct an in-depth analysis on how to leverage current ongoing GRA projects to identify and rope in other income earners into the tax net by not creating huge collateral damage to law-abiding taxpayers all in the name of hitting recalcitrant income earners in my subsequent publications.

This article is my personal and professional opinion as a tax practitioner in the discharge of my duties as a GHANAIAN CITIZEN who seeks the success of Ghana, and it is not a representation of the opinion of any institution.