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Business News of Friday, 6 February 2004

Source: GNA

BUDGET: Corporate Tax to reduce by 2.5%

Accra, Feb. 5, GNA- The Government has proposed a reduction in corporate income tax rate from 32.5 per cent to 30 per cent effective next financial year.

Mr Yaw Osafo-Maafo, Minister of Finance and Economic Planning, who announced this in the Budget Statement to Parliament, on Thursday, explained that the measure would ease the tax burden on the corporate sector and facilitate the achievement of the "Golden Age of Business".

Additionally, the Government announced some relief measures to encourage more companies to list on the Stock Exchange. Mr Osafo-Maafo said companies, which would be listed for the very first time on the Exchange, would be granted a tax rebate by having their corporate profits charged at a 25 per cent tax rate instead of the current 32.5 per cent.

This provision, he said, would be applicable for three years. " New entrants to the Exchange would, however, have to be fully listed to enjoy this special tax rate of 25 per cent," he cautioned. The Minister also announced a tax holiday of five years for new industries that would engage in Agro and Waste Processing. This special income tax rates, Mr Osafo Maafo said, would help to expand locally produced agricultural products.

He explained that the corporate income tax of agro-processing industries would be fixed according to their locations. Those in Accra and Tema would attract 20 per cent, while other regional capitals would pay 10 per cent.

However, there would be no tax for such businesses outside the regional capitals.

"The new rates are substantially lower than existing relief granted to such companies on the basis of location," he said. The Minister said in the case of the Northern, Upper East and Upper West regions, corporate tax for such companies shall be zero irrespective of whether the industry is located in the regional capital or otherwise.

He further said: "This new rates schedule will now be applicable to all existing agro-processing industries that use local raw agricultural products as their main inputs. This tax regime shall, however, not be applicable to companies, which process raw cocoa beans which already enjoyed some reliefs."

Mr Osafo Maafo announced companies, whose principal activity is processing waste including re-cycling of plastic and polythene material, would pay no corporate tax for the first seven years of their operations irrespective of location.

Other additional incentives, he said, would be considered on a case-by-case basis by the Ghana Investment Promotion Centre (GIPC). Mr Osafo Maafo said these would encourage companies to invest in activities that would assist in efforts to introduce efficient waste management systems.