Last hurdle of IMF deal is bilateral creditors’ agreement

Parliament has passed the outstanding revenue bills concluding the required prior actions agreed in the Staff-Level agreement to advance Ghana’s $3 billion programme to the International Monetary Fund (IMF) Executive Board for the country to ease its current economic difficulties.

The Bills

The Bills, which were passed under a certificate of urgency during a marathon all-night session of the House include the Excise Duty (Amendment) Bill, 2022 and Income Tax (Amendment) (No. 2) Bill, 2022.

The others are Growth and Sustainability Bill, 2022 and the Ghana Revenue Authority (Amendment) Bill, 2022.

Ofori-Atta moved Motions

Ken Ofori-Atta, the Finance Minister, moved each of the Motions for the House’s approval, with Mr Kwaku Agyeman Kwarteng, the Chairman of the Finance Committee of the House seconding.

Minority opposed the Bills

The passage of the Bills was done by the House with the support of the 137 ruling New Patriotic Party (NPP) Majority Members of Parliament (MPs) with stiff opposition from the opposition National Democratic Congress (NDC) Minority Caucus.

2 NPP MPs carried in ambulances to the parlour

During the consideration of the Bills, two NPP MPs who were ill were carried in ambulances to the parlour of the Chamber of the House for the Leadership to take notice of their presence in order for them to be captured as part of those in attendance of the Business of the House.

Minority Leader

Dr Cassiel Ato Baah Forson, the NDC Minority Leader and Ranking Member of the Finance Committee of the House, in opposing the Bills, indicated that Ghanaians were already suffering on the back of huge taxes.

Alleviate the suffering of Ghanaians

He noted that it was only right that the government avoided introducing additional taxes to alleviate the suffering of Ghanaians.

Other actions taken already

Government has already 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).

GH₵4bn revenue targeted each year

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.

Zero budget financing by BoG

Under the Staff Level Agreement with the IMF, Bank of Ghana (BoG) and the Ministry of Finance have finalised a Memorandum of Understanding (MoU) on zero budget financing which will be signed soon.

Passage to increase Tax-to-GDP from 13% to 18%

The passage of all the outstanding revenue bills 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%.

Paris Club to form Creditor Committee

According to Ofori-Atta the Paris Club, together with other creditors including China, India, Saudi Arabia, and Turkey have agreed to form an Official Creditor Committee (OCC) on Ghana.

International holders of Ghana’s Eurobonds

He also said discussions with international holders of Ghana’s Eurobonds are also progressing smoothly.

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.

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.

Fiscal policy on a consolidation path

Government is confident 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

The domestic debt exchange, new revenue measures, and structural fiscal reforms are expected to provide significant reduction of debt service and help create fiscal space.

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.

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.