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Business News of Saturday, 21 July 2018


New tax bills laid in parliament

Existing bills which need amendment and a new bill to encompass the newly-imposed taxes have been laid before parliament.

Government is seeking an amendment to the Ghana Education Trust Fund (GETFund), National Health Insurance Bill, Income Tax Bill, Value Added Tax (VAT) Bill and the introduction of the Luxury Vehicle Levy Bill.

These were laid on the floor of parliament on Friday, 20 July 2018 by Deputy Minister of Finance, Abena Osei Asare, on behalf of Finance Minister Ken Ofori-Atta.

The bills were later forwarded to the Finance Committee of parliament for further deliberation.

On Thursday, Mr Ofori-Atta announced in the mid-year budget review that there would be a luxury vehicles tax. He also said the 2.5% NHIL VAT rate as well as the 2.5% GETFund VAT rate will be converted into straight levies.

“On the under-performance for the first five months of 2018, we will end the year with an estimated deficit of 4.9% of GDP compared to the programmed target of 4.5%, resulting in a fiscal gap of GHS870 million, unless we immediately implement some fiscal measures; intensive tax compliance measures, New revenue measures, Intensive Conversion of NHIL (2.5%) to a straight levy, Conversion of GETFund VAT rate of 2.5% to a straight levy, Imposition of luxury vehicle tax of GHS1,000 – GHS2,000 on non-commercial vehicles with capacity of 3.0 litres and above, review of PIT to include an additional band of GHS10,000 and above per month at a rate of 35% and downward adjustment discretionary expenditures,” The Finance Minister said.

Mr Ofori-Atta also said categorically that there will not be any increase in VAT as widely speculated.

It had been reported by some media houses that the government intended increasing VAT from 17.5% to 21.5%.

However, the Minority in Parliament and former Deputy Finance Minister Seth Terkper hold the view that VAT has been increased through subtle means.

“Ghana’s VAT rate is 17.5 per cent and that includes NHIL (2.5%) and GETFund (2.5 %). Removing them from the VAT base and making them specific rates (instead of ad valorem) and increasing that rate to earn more revenue (quoting Hon Kwarteng) is a ruse,” Mr Terkper stated in a tweet shortly after the budget presentation by Mr Ofori-Atta.

Mr Terkper pointed out that the move by government “is a VAT increase in disguise”.

“Businesses should not rejoice yet because they cannot claim Input Tax Credit/refunds on 5% of the current 17.5 percent rate. Already, the Flat Rate is denying some registered businesses refunds and Input Tax Credit,” he further explained.

“The measure amounts to a parallel Sales Tax regime that that the VAT replaced. it is a retrogressive step and further mutilation of the VAT regime.

“The removal of Input Tax Credit and Refunds will increase costs and prices. It is not an efficient and business-friendly move,” he added.