The American Chamber of Commerce, Ghana, on Friday, January 10, held the 2020 Economic Outlook Forum to provide members with insights on the 2020 Budget Statement of the Government of Ghana, the implications of tax and fiscal policies on businesses as well as highlight compliance with existing and emerging legal and regulatory policies.
Abeku Gyan-Quansah, Tax Partner at PwC, presented Ghana’s 2020 Economic Outlook with emphasis on the 2020 Budget Statement and its impact on business, the state of the economy, the new companies act, and the proposed tax exemption bill.
Mr. Gyan-Quansah, in his presentation, noted that the Government of Ghana expects to achieve a real GDP growth (including oil) of 6.8%, an end of period inflation of 8%, and an overall fiscal budget deficit of 4.7% in 2020. He stated that the government’s expenditure for 2020 is estimated to be GH¢84.5 billion, and its total revenue is estimated to be GH¢67.1 billion resulting in a deficit of GH¢17.4 billion.
According to him, although from experience, governments are prone to overspend in an election year, the overall fiscal deficit in 2020 is expected to remain within the 5% threshold imposed by the Fiscal Responsibility Act (2018) which requires fiscal deficit to be up to 5%.
He mentioned that of the GH¢67.1 billion revenue expected in 2020, the government intends to generate GH¢51.5 billion from taxes alone (GH¢26.6 billion from income and property tax, GH¢19.1 billion from taxes on goods and services and GH¢5.8 billion from international trade tax). He cautioned that given that Ghana’s economy is largely informal and the fact that 2020 is an election year, the government will pursue companies rather than individuals to be tax compliant in 2020.
He also stated that the government’s anticipated GH¢26.6 billion revenue from direct taxes represents a 20% increase from the revenue generated in 2019. And to achieve this growth in revenue, it is likely the government will introduce new taxes in addition to existing measures. The new measures, he said, could include:
- increase in the tax-free band for individuals to ensure that the minimum wage for 2020 is tax-exempt;
- increase in personal reliefs such as marriage relief, child education relief, personal educational relief, and old age relief;
- renewal and extension of the National Fiscal Stabilization Levy (NFSL); and
- a 5% tax on the accounting profit before tax of selected entities;
- a requirement for taxpayers to disclose their aggressive tax planning arrangements under the relevant Base Erosion and Profit Shifting (“BEPS”) Action Point.
For indirect taxes, Mr. Gyan-Quansah noted that the government intends to introduce new policy measures in addition to existing ones to achieve its 2020 revenue target. The new policy measures include:
- the renewal and extension of the Special Import Levy for five years;
- strengthening the regulatory framework for taxation of the digital economy;
- Value Added Tax (VAT) exemptions for fund management companies; and
- the Automative Manufacturing Development Policy which offers three to ten years of tax holidays as well as VAT and Special Import Levy exemptions for businesses in the automotive industry for vehicles.
He explained further that the government will introduce tax-related administrative measures to enhance revenue mobilization. According to him, the tax administrative measures include:
- a Revenue Administration Regulation which includes a voluntary disclosure procedure to waive penalties on voluntary disclosure by taxpayers and an Alternative Dispute Resolution to resolve tax disputes between taxpayers and tax administration;
- reforming the Ghana Revenue Authority to make it more efficient and productive; and
- developing a comprehensive revenue policy and strategy.
He added that Ghana now has a Tax Exemptions Bill with clear procedures for obtaining tax exemptions, but the bill is yet to be passed into law, although the government had intended to pass it in June 2018. He, therefore, called on parliament to speed up processes to pass the bill. He also noted that the Tax Exemptions Bill, if passed into law, will repeal any existing enactment related to tax exemptions except for enactments in income tax and the VAT.
Constance Ameyartey, Chartered Secretary, PwC, briefly educated members of the chamber on major changes in the new Companies Act 2019 (Act 992). She noted that, apart from companies operating in regulated industries, the new Companies Act grants companies the option to file a registered constitution upon registration with the Registrar of Companies. She added that the Companies Act 2019 (Act 992) also ensures easy identification of the actual legal form of a registered company.
She also explained that under the new Companies Act, a person appointed a director of a company must among other things consent in writing, should not be an ex-convict or found culpable for any criminal offense within the preceding five years. According to her, the new Companies Act also outlines specific qualifications and duties for secretaries that companies must comply with. Also, the new Act stipulates that auditors can be appointed by a company for six years and can be reappointed after another period of six years. She further explained the provisions under the new Companies Act on beneficial ownership, dealing with major transactions, and unclaimed dividends.
Finally, Mr. Gyan-Quansah cautioned members of the Chamber to comply with all tax regulations in the country with particular emphasis on payments and revisions of annual returns with Ghana Immigration Service; PAYE reconciliation and payment of Quarter 1 taxes; statement of estimated tax payable and payment of Quater1 taxes; income tax returns and transfer policy return; employer’s annual tax deduction schedules and individual income tax return for employees; and annual returns at the Registrar General’s Department.
After the presentation, members of the Chamber asked questions on the stability of the Ghanaian currency, revision of tax laws to help support local companies, protection of minority shareholders, and the role of directors under the new Companies Act.