Government announces tax holidays for 2012

Accra, Nov. 16, GNA – Government has granted a number of tax holidays which will soon be published by the Ghana Revenue Authority, Dr Kwabena Duffour, Finance and Economic Planning Minister announced on Wednesday when he presented 2012 budget statement to Parliament.

He said the completed review of the relevant incentives granted under LI 1817, would be incorporated into the Internal Revenue Act 2000, (Act 592) to be managed by the Ghana Revenue Authority (GRA).

The completed review of incentives empowered the Ghana Investment Promotion Centre (GIPC) to grant tax exemptions to the hospitality industry in 2011.

Dr Duffuor said under the full list of the incentives, the government had decided to reduce the sector's corporate tax rate from 22 percent to 20 percent to boost the hotel and hospitality industry.

The Ghana Stock Exchange, the Minister indicated to improve its capitalization, Government was extending the Exchange's tax holiday for another five years.

In addition, he said, the exemption from capital gains tax had also been extended for further five years to promote investment and deepen activities on the Stock Exchange.

Mutual funds and Unit Trust Funds that invested in stocks on the Stock Exchange would also be exempted from VAT on financial services.

Dr Duffuor said in line with the government's social democratic principles, personal income taxation would continue to be used as a measure for equitable distribution of income and also for the protection of low-income earners.

Taking cognizance of the current inflation trends in the country, the impact of the real increases in GDP on personal incomes, and to compensate for the loss in purchasing power of income earners, he said, government had revised the income tax thresholds and brackets as follows:

Proposed Income Tax Brackets for 2012

Income Band
Rate

1. First GH.1,440
Free

2. Next GH.720
5.0 %

3. Next GH.1,008
10 %

4. Next GH.25,632
17 %

5. Exceeding GH.28,800
25 %
Dr Duffour noted that though in the 2011 budget all the personal tax reliefs were revised upwards, it had been observed that many individual tax payers were not taking advantage of the tax relief scheme, with the reason that the GRA would not implement the scheme expeditiously.

“The GRA had signaled its readiness to fully implement the personal relief refunds to the fullest,” he noted.

He said the National Fiscal Stabilization Levy (NFSL) was introduced in the second half of 2009 to last for a period of 18 months, however, in 2011, government extended it for an additional one year.

"In order to keep to our promise, government had abolished the NFSL with effect from fiscal year 2012. However, all arrears due would be collected."

Dr Duffuor noted that the change from specific to ad valorem duties on alcoholic and non-alcoholic beverages improved revenue collection significantly in 2011 and that despite the reduction in the rate by 2.5 percent, revenue collection had increased.

Government, he said, would consider a further reduction in the rate as the industry increased the use of local raw materials in production and further investment in capital, technology and employment of labour.

As a matter of priority, Government would grant excise duty reduction on a sliding scale to companies using local raw materials as substitutes in the production of excisable goods.

Dr Duffuor announced that in fiscal year 2012, government would bring before the House of Parliament some bills for consideration to strengthen the GRA to harmonise and organize the administrative procedures and processes for effective revenue mobilization.

These include a tax administration bill, which would seek to consolidate the common procedures of all the tax laws, the internal revenue bill; the customs bill; and the VAT amendment bill, assuring that “this will not lead to an increase in the VAT rate”.

As part of measures to enhance revenue, the Minister stated that GRA had started building up a database of prices of goods imported into the country as a basis for comparison with the Final Classification and Valuation Report (FCVR) issued by the Destination Inspection Companies.

This mode of monitoring had improved revenue collection, he indicated, adding that in 2012 the GRA would broaden the coverage of the database with the view to further improving revenue collection.

He said as part of measures to improve revenue administration, the more than 300 customs bonded warehouses scattered over the country would be reorganized and reduced to a reasonable number in 2012 while the remaining bonded warehouses would be re-zoned and sub-offices created to ensure efficiency.

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The Minister further announced that as part of government's commitment to improving efficiency in revenue collection, the GRA in 2012 would introduce the Ghana Integrated Cargo Clearance System (GICCS) to track and account for containers and consignments arriving at the ports in the 2012 fiscal year.

In addition, risk management would be improved by targeting revenue risk consignments for examination based on profiling, and provisions would be made to facilitate the release of compliant consignments.

In 2012, the Ministry of Finance and Economic Planning, together with the GRA would continue to work at restricting the use of permits and improve its monitoring, he noted.

He said the free zones concept introduced by government to promote export had suffered various abuses in the past, therefore would ensure that 70 per cent of production in the Free Zones areas was duly exported and the quota of 30 per cent for the local market was adhered to. The customs division of the Ghana Revenue Authority would in 2012 step up its monitoring of the free zones operators.

On air transport and aviation development, the Minister said KIA over the past three years had seen a dramatic increase of over 100 per cent in traffic volume and that over 33 airlines currently used KIA compared to only 15 airlines four years ago.

”While these airlines have requested for increase in flight frequencies other international airlines have applied for bilateral arrangements and commencement of flight operations in Ghana. Similarly, the domestic aviation market has attracted considerable interest as evidenced by the entry of new airlines. This has increased competition and already resulted in about 30 per cent reduction in domestic air fares”.

He said with the increase in air traffic volumes, infrastructure and facilities at the airport were under severe pressure which had led to the current congestion at both the arrival and departure halls. “Massive investments are therefore required to expand the facilities at our airports in areas such as upgrading and extension of runways, as well as baggage handling facilities.”

He announced that in 2012 government would set up a committee to propose the modalities for funding the expansion and modernization of KIA and other regional airports.

Dr Duffour expressed government's conviction that the successful implementation of “these measures will increase the tax revenue from 16.5 per cent of GDP in 2011 to 17.3 per cent in 2012.

GNA