On Friday, March 31, 2023, the Ghanaian Parliament controversially passed three bills: Excise Duty, Growth and Sustainability Levy and Income Tax Amendment, despite significant opposition from Minority MPs, who narrowly lost the vote to approve the bills by 136 to 137.
The Finance Ministry hopes to raise 4 billion Ghana cedis in annual domestic revenue through the financial bills passed by Parliament.
The laws are also essential to the government’s efforts to speed up the Board’s approval of the $3 billion IMF Programme staff-level agreement.
According to the Finance Ministry, the three bills are expected to each rake in the following:
Income Tax Amendment Bill, 2022 = GH¢1.2 billion annually
Excise Duty Amendment Bill, 2022 = GH¢400 million annually
Growth and Sustainability Amendment Bill, 2022, = GH¢2.2 billion annually
What will the three Tax Amendment Bills affect?
On December 14, 2022, the Minister of Finance, Ken Ofori-Atta, submitted a memorandum to the House detailing the content of the Bills. The memo states;
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; increase the excise duty in respect of wine, malt drinks and spirits and impose excise duty on sweetened beverages and electronic cigarettes and electronic cigarettes liquids to increase revenue.
The ECOWAS Directive on the harmonisation of excise duties on tobacco products directs that the excise duty must include an ad valorem and a specific duty. Specifically, the ad valorem rate is required to be fifty per cent or more. In contrast, the specific tax is required to be the minimum equivalent of zero point zero two United States Dollars (US $ 0.02) per stick in the case of cigarette, cigar and cigarillo and the cedi equivalent of twenty United States Dollars (US $20) per net kilogramme for all other tobacco products. The Bill 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. However, these products do not attract excise duty. 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. However, the excise duty on spirits is lower than that on beer. To address this, the excise duty on spirits is being raised above that of beer, following good practice in imposing excise duties. Consequentially, the excise duty on wines has been reviewed upwards.”
Income Tax Amendment Bill, 2022
The object of the Income Tax (Amendment) (No. 2) 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, introduce a withholding tax rate on the realisation of assets and liabilities and winnings from the lottery, unify the loss carried forward provisions and revise the treatment of foreign exchange losses and 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 thirty-five per cent as part of the high net worth taxation policy. The upper limits for quantifying motor vehicle benefits have not been revised since 2015. The government has revised these upper limits to account for inflation.
Compliance with the requirements for tax payment on the realisation of assets and liabilities is being made more efficient with the introduction of a return to be submitted within thirty 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 per cent, while the treatment of foreign exchange gains is restricted to actual losses. Foreign exchange losses relating to capital expenditure are also to be capitalised. The income tax rates for temporary concessions are being reviewed upwards to phase them out gradually. These amendments are necessary to support the growing economy and will lead to a revenue yield of approximately one billion two hundred and ninety million Ghana Cedis.
Growth and Sustainability Levy Bill, 2022
Another purpose of the Bill is to impose a special levy known as the Growth and Sustainability Levy to raise revenue for the growth and fiscal sustainability of the economy. 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 two billion two hundred and sixteen million Cedis. The Levy is subject to review by the Minister responsible for Finance in 2025.”
Oppositions to the Bills
The Bills have faced fierce opposition from different interest groups and stakeholders.
Position of the Minority
Tamale Central Member of Parliament Ibrahim Murtala Muhammed says, “We think that it is unacceptable to tax the already burdened Ghanaian with such taxes and in any case, there is no reason why the government will want to burden the people of this country with more taxes. These taxes have nothing to do with the IMF arrangement, which is the story that has been peddled out there by the minority. So we are very convinced.”
Joint Business Consultative Forum to petition Akufo-Addo
The Association of Ghana Industries (AGI), the Ghana Union of Traders Association (GUTA), the Chamber of Commerce, and other business organisations say that the government should focus on what will secure corporate sustainability. Under the umbrella coalition, Ghana Joint Business Consultative Forum, the organisations conducted a news conference on Tuesday, April 4, 2023, asking the government to take a second look at the revenue bills.
During a press conference, GUTA President Joseph Obeng called on the government to “create an enabling environment that would ensure the growth and sustainability of the private sector rather than overtaxing businesses out of their effectiveness.”
He believes that the government should not put the survival and development of the private sector ahead of the International Monetary Fund program.
The Joint Business Consultative Forum has decided to challenge President Akufo-Addo on the passage of three revenue tax amendment bills voted by Parliament on April 6, 2023.
According to the Business Groups, applying these taxes will spell disaster for the Ghanaian business community, necessitating a reassessment of the taxes.
They say businesses face high taxes, making them less appealing and uncompetitive globally.
According to Mark Badu-Aboagye, CEO of the Ghana National Chamber of Commerce and Industry, it will be in the best interest of the government to pay special attention to the business sector.
“If they really want the monies they are looking for from these taxes that they have passed, it is the government’s interest to listen to us. We are still putting the papers together; hopefully, this petition will get to the President by this morning.”
He said they would work quickly before the President’s signature was appended. “We want to do it as quickly as possible for him to understand our plight before he assigns to the bills that have been passed.”
The new tax bills and Ghana’s retailers
Bamfo Maxwell, a retailer, said, “In every country, taxes are what the government uses to improve the living conditions of the people. But the living standard is very high in our case, so adding more or bringing in new taxes will greatly burden us, traders.”
Agnes Akomia, who deals in sugar-sweetened beverages, added, “Because of the taxes, the sales will reduce. That is the first problem. So you will spend some of the money I have already invested in the business, so I don’t know, with time I think we have to stop the business.”
In support of the new bills
The Ghanaian government maintains that the new revenue legislation aims to generate roughly four billion Ghana Cedis in domestic revenue each year.
In a press conference in Accra, the Ghana Noncommunicable Disease Alliance expressed their support for passing the excise duty reform bill.
Mr Labram Musah, Executive Director of Programs Vision for Alternative Development, said in a news conference on Thursday, April 6, 2023, that increasing the price of tobacco products through taxing is the most efficient way to keep them out the hands of children worldwide.
According to him, the bill’s final passage in its current form will indicate Ghana’s commitment to addressing one of the primary causes of noncommunicable diseases such as cancer, cardiovascular disease, and chronic obstructive pulmonary disease.
Tobacco, alcohol, and sugar-sweetened beverages are responsible for 17,000 deaths in Ghana each year.
President Nana Addo Dankwa Akufo-Addo has signed the three new taxes passed by Parliament into law.
The Information Minister Kojo Oppong Nkrumah confirmed the development, stating that the bills had been returned to the Clerk of Parliament for the final formalities to be completed.
“From there, there will be the necessary transmittals before the Ghana Revenue Authority can commence implementation.”