VAT Relief For Pharmaceutical Companies

Mr Aseidu Nketia(middle),chatting with some   parliamentaians after the budget statement.Photo.Seth Adu AgyeiThe government has taken a bold step to support local industries by proposing a couple of tax incentives for certain sectors of the economy.

In its 2015 Budget, the government has proposed to remove VAT on specified locally produced pharmaceuticals, and some of the raw materials used for the production of these pharmaceuticals.

The announcement by the Finance Minister, Seth Terkper, yesterday when he presented the 2015 Budget to Parliament, has confirmed The Ghanaian Times publication on Tuesday that the government would provide tax incentives to certain sectors of the economy.

The Minister said the exemption policy would be based on VAT and on a list of special essential medicines not manufactured in Ghana and approved by the Minister of Health.

That, he said, would ensure neutrality, and reduce the cost of pharmaceuticals sold in Ghana and make them more affordable to Ghanaians.

He said the government would also remove import duty and VAT on inputs for the production of machetes and production of exercise books and “to benefit both our farmers and the printing industry”.

“It is being proposed that in order to increase smart phone penetration, and in line with Government’s policy of bridging the digital divide within the country, import duties on smartphones will be removed,” he said.

Mr. Terkper said the increase in smartphone penetration was expected to increase revenue from Communication Service Tax, VAT and corporate taxes.

He said the government recognised the role that tax incentives play in creating an enabling investment climate.

“Ghana still needs investments in critical areas of the economy. However it is necessary to reduce abuses and the granting of excessive exemptions,” he said.

The Finance Minister said the Free Zones Act would be reviewed in 2015 to enhance the relevance of activities in the sector for greater emphasis to be placed on manufacturing and value addition.

Additionally, he said, the corporate tax rate of companies after the enjoyment of the 10 years tax holiday would be increased from 8 per cent to 15 per cent, adding that the use of the VAT Relief Purchase Order (VRPO) in the granting of relief would be abolished next year.

The refund system, he said, would be beefed up to pay refunds when the requests were duly vetted and certified.

“Tax exemptions granted in loan agreements would also be reviewed to reduce the scope of exemptions, granted and the use of special permit will be drastically reduced. The terms of draft Agreements must refer to the application of tax treaties, where necessary,” he said.

A more efficient refund system, he said, would be put in place to cover duty drawback, VAT refund and corporate tax overpayments.

 

Compliance

  • In 2014, the GRA initiated a taxpayer compliance monitoring measure which involved the use of tax payer and third-party data to match taxpayers’ declaration in order to ascertain their compliance levels.
  • This measure is designed to improve Tax Payer Compliance using information reported to the GRA by tax payers and a range of third parties. The exercise started first with the use of data on importation from the GCMS and was subsequently extended to GIFMIS data covering payments made to government’s suppliers.
  • Against the backdrop of the modest gains made, the GRA will scale up the project in 2015, with a view to making it a permanent and a routine compliance monitoring tool. In this regard, Customs procedures for the clearance of goods at the Ports are being reviewed to include the requirement for importers to indicate their TIN numbers and which domestic tax offices they pay taxes.
  • Also, the GRA will interface directly with the GIFMIS infrastructure so as to acquire data in real time for the exercise. GIFMIS infrastructure can subsequently be used to validate Taxpayer Identification Numbers (TIN).

By David Adadevoh   

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