17.5% Special Petroleum Tax Announced

Ghanaians will have to brace up to pay more for petroleum products as government has requested parliament to approve a Special Petroleum Tax of 17.5 per cent.

Finance Minister, Seth Terkper, in Accra yesterday when presenting the 2015 budget to Parliament, said the imposition of Special Petroleum Tax was part of the rationalisation of the VAT regime and a change in the petroleum pricing structure.

“This policy comes with a mitigation account to manage extremely low and high prices that result in sporadic price increases or decreases under the automatic adjustment formula and reversal of the excise tax on petroleum from ad valorem to specific,” he said, in the budget on the theme “Transformational agenda: Securing the bright medium term prospects of the economy”.

Apart from the 17.5 per cent tax proposal, the government has also announced the extension of the National Fiscal Stabilisation Levy of 5 percent and Special Import Levy of 1-2 per cent to 2017.

Also announced was, VAT on Fee-based financial services and a five per cent flat VAT rate on real estate and increased withholding tax on director’s remuneration from 10 per cent to 20 per cent.

Mr. Terkper said Ghana’s fiscal policy for 2015 would be driven mainly by new tax policy measures, revenue administration reforms, improved public financial management, expenditure rationalisation, and the implementation of new debt management strategies.

He said government would continue to implement the on-going expenditure measures it had been vigorously pursuing under its home-grown policy.

The measures include government’s fiscal stance to negotiate public sector wages within budgetary constraints to ensure the sustainability of the Single Spine Pay Policy.

He said government was also mindful of the signal and pressure that public sector base pay could have on the private sector’s application of the minimum wage.

“In line with another decision reached at the Ho Forum, we worked hard to complete negotiations on wage adjustments for 2015 before the Budget but could not achieve this goal”, he said.

Mr. Terkper affirmed the intention of government to continue the policy of net freeze on employment into all sectors of the public services, excluding education and health, and non-replacement of departing public sector employees in overstaffed areas.

“We will continue to implement the existing price adjustment mechanisms for utility tariffs and fuel prices which as noted earlier, has eliminated the spectre of long queues for fuel”, he said, adding that as the gas supply situation improved, it was expected that consumers would also see the benefits of the utility price adjustments.

On inflation, the Finance Minister said price pressures had been largely contained with Consumer Price Index (CPI) inflation generally below targets in advanced economies, and that in emerging market and developing economies, inflation was projected to decline to 5.5 percent in 2014, down from 5.9 percent in 2013.



Sliding Scale Excise Duty

In November 2012, government introduced a sliding scale excise duty on beer and malt to provide an incentive for brewery companies which use local raw materials as substitutes for their imported raw materials.

The object of this local content policy is to increase employment opportunities, reduce import bill, as well as increase capital investment and acquisition of new technology.

Subsequently, a four tier excise regime was introduced. In 2015, government will review the policy to ensure greater efficiency and compliance by the beneficiaries.

In the process, GRA will introduce appropriate guidelines and make recommendations for improvement.


Excise Duty on Tobacco

Ghana’s excise tax as a percentage of cigarette prices is one of the lowest in the region.

It has been estimated that the excise tax as a percentage of retail price is 14 percent while the average for Africa is 33 per cent.

It has also been established that in order to reduce the consumption of tobacco and its related health hazards, excise tax should be 70 percent of the retail price. In pursuance of these goals the excise duty rate will be increased from 150 percent to 175 percent.


Tax Identification Number (TIN)

In 2014, the GRA made it a must for all taxpayers to acquire TIN before transacting business at the various ports.

Tax payers are also required to declare what tax office they pay their taxes to customs authorities.

In conjunction with the National Identification Authority (NIA), the requirement of the TIN will be extended to other sectors to facilitate the identification of eligible taxpayers. Again, to ensure that the status of persons on the Taxpayer Register is accurate, they will be required to validate their data every two years.

By David Adadevoh

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