Government would revise the income tax threshold and bracket in 2011 to take into account the inflationary impact on wages and salaries.
Dr Kwabena Duffuor, Minister of Finance and Economic Planning, announced this when presenting government's fiscal and economic policy to Parliament in Accra on Wednesday.
* For the first GH�1,140 of income, the tax is free; * For the next GH�360 the tax rate is five (5) per cent; * For the next GH�840, the tax rate is 10 per cent; * For the next GH�17,976, the tax rate is 17.5 per cent; and * For income exceeding GH�20,280, the tax rate is 25 per cent.
While the changes in the exempt income tax band and brackets are beneficial to all income earners, they do not address adequately the social burden of families with children, dependent spouses, and dependent relatives.
Since 2007, the rates of personal reliefs have remained the same. This discourages taxpayers to file their returns and benefit from the reliefs, significant improvements have been made in the reliefs for the 2011 year of
assessment:-* For marriage/dependant responsibility the new rate is 100 currency points; * For old age, the new rate is 100 currency points;
* For child education, the new rate is 100 currency points up to 3 children;
* For aged dependant relative, the new rate is 50 currency points; and
* For training cost, the new relief is 200 currency points.
* Personal relief for the disabled remains at 25 per cent of the taxable income.
"I encourage and urge tax payers to file their returns and get the requisite credit," the Finance Minister urged.
Dr Duffuor said the theme for the 2011 budget "Stimulating Growth for Development and Job Creation", had been chosen to focus attention on the need to propel the economy onto a higher growth and development trajectory.
TAX PROPOSALS FOR 2011 FISCAL YEAR
* Mining royalties, henceforth, will be paid monthly instead of quarterly;
* Deferred payments of VAT will be discontinued, but introduce measures to improve the refund system.
* The practice of allowing importers of finished products, to warehouse them for up to two years before payment of assessed taxes is not consistent with bonded warehousing regime.
* It imposes cost on the treasury, henceforth, the bonded warehousing facility will be restricted to only raw materials for manufacturing as originally intended.
On withholding tax, the threshold of the five (5) per cent withholding tax will rise from fifty currency points (GH�50.00) to five
hundred currency points (GH�500.00).
The present exemption from withholding tax for compliant taxpayers on application will continue and will be improved.
The current withholding tax of five (5) per cent applied across board for foreign suppliers of services makes local entrepreneurs who are subject to 25 per cent corporate tax plus all other payroll taxes uncompetitive, especially in the supply of services in the extractive sectors of the economy.
This defeats government's goal to enhance local content particularly in the petroleum sector, therefore the withholding tax on foreign supply of services is hereby increased from five (5) per cent to 15 percent and shall be treated as final tax.
Tax holidays, the five years exemption period granted to companies engaged in the construction for letting or sale of residential premises, was mainly to create affordable accommodation for the middle to low income
earners.
Unfortunately, the real estate developers focused on building for the high and upper class of the society while abandoning the original purpose.
The government proposes to abolish the general five year tax exemption for real estate developers.
However, given government's heavy involvement with the provision of affordable housing, real estate developers who partner the Ministry of Water Resources, Works and Housing to provide affordable houses will continue to
benefit from the five year exemption.
Government recommends to Parliament to repeal LI 1817 which empowers the Ghana Investment Promotion Council (GIPC) to grant tax exemptions for the hotel and hospitality industry.
Stock of the relevant incentives would be undertaken to bring them in line, and incorporate those that are desirable into Act 592 to be managed by the Ghana Revenue Authority as was previously the case under the defunct Ghana Investment Centre.
The APEX Bank was granted a five-year tax holiday for the period 2005-2009 and recognising its role in ensuring the proper supervision and
effective operation of the rural banking system, the tax holiday has been extended by an additional five years to bring its tax holiday to a 10-year-period ending in 2014.
This measure would help the APEX Bank to improve its capital base, strengthen its credit portfolio to agriculture, and at the same time
concentrate on its mandate to service the rural communities.
Gift Tax moves in tandem with general Income Tax including Capital Gains Tax and since Capital Gains Tax has been increased from five (5) per cent to 15 per cent it is proposed that an increase in gift tax to be in tandem with general income tax.
Communication Service Tax (CST) previously restricted to the class 1A telecom operators, and to ensure fairness across the industry, the CST
coverage would now be extended to all companies and persons across the industry, in conformity with the existing law.
Value Added Tax - Ghana's VAT threshold for goods and services is the lowest in Sub-Sahara Africa and by international standards.
In order to improve the efficiency in tax administration following the integration of VAT and IRS, and improve on tax audits of the top tier VAT payers, the VAT threshold will increase from GH�10,000.00 to GH�90,000.00 for both goods and services.
The VAT taxpayers who fall below the GH�90,000 threshold will now fall into a new scheme of combined VAT and income tax assessment. The details of the combined assessment will be in the VAT Amendment Bill yet to be submitted to
Parliament.
In order to protect the environment, government proposes a 20 per cent environmental tax on plastic packaging materials and products, excluding bottled water which already attracts excise duty.
The environmental tax would be charged at the importation and any production or collection points.
The change from specific to ad-valorem excise duties on tobacco, alcoholic and non-alcoholic beverages rates have achieved the desired objective.
However, in cognisant of the need to remain competitive and of concerns of industry, government proposes to reduce the ad valorem rate by 2.5 per cent on all excisable goods except on spirits and cigarette.
For health reasons and to better align with international agreements, the excise duty on cigarettes would rise from 140 per cent to 150 per cent.
Vehicle Income Tax Rates (VIT) -The presumptive taxes for Vehicle Income Tax was last reviewed in 2005. To improve fairness with the payment of personal income tax and other income taxes, government proposes an upward revision of presumptive vehicle income tax rates.
This is not a tax on drivers and transport owners have the right to claim the advance tax paid as credit.
"Taxis" and "trotros" are, in line with the social democratic ideals which are pro-people, exempted from the new vehicle income tax rates.
Tax Stamp for Informal Sector Operators was introduced as presumptive tax for the informal sector in 2005. The operators in the sector were classified according to the size and volume of their business activities and a presumed tax levied on quarterly basis. Since 2005 the rates have not been revised to be in line with general movements in price levels, government proposes to revise the rates and a bill to that effect will be tabled in the
House soon.
Taxation of Professionals and the Informal Sector - Ghana has many self-employed professionals earning more than average income. They include accountants, engineers, pharmacists, architects, surveyors, building contractors, medical doctors, lawyers, economists, bankers, insurers, and consultants.
Educated with taxpayers money, many of these professionals continue to depend on the complementary resources of the State to operate their businesses, unfortunately, their contributions to overall income tax revenue
has been very low (around five (5) per cent) compared to other income tax payer.
Government to encourage voluntary compliance of professionals in the discharge of their tax obligations, beginning in 2011, government would
focus attention on the revenue contribution from the self-employed group with special emphasis on professionals.
Government would establish a special desk in the Domestic Tax Division of the Ghana Revenue Authority to monitor compliance of professionals in their tax payments.
Mining List- in consultation with the Mining industry a review of the mining list was done in 2004, in the same spirit government intends to carry out another review in 2011 to reflect changes that fairly meet the needs of the industry, tighten exemptions, ensure fairness across industries, while safeguarding revenues.
National Fiscal Stabilisation Levy (NSL) was introduced in the second half of 2009 to last for 18 months. In lieu of bringing in additional Profit Tax, government proposes to extend the NFSL for an additional year.
Institutions with Tax-Free Status - some institutions enjoy tax-free status because of the original non-profit motive that established them.
However, in recent times, some of these institutions have expanded their scope of operation to include commercial activities, thereby making substantive profits but not paying taxes on them.
Government would amend the law to allow the Commissioner-General to tax all commercial activities undertaken by the affected institutions.
Airport Tax - Government proposes to increase airport tax from 75 dollars to 100 dollars for economy, 150 dollars for business and 200 dollars for first class passengers, for international travel; 50 dollars to 60 dollars for regional travel and GH�1 to GH�5 for domestic travel.
TOR Debt Recovery Levy- in 2003, a Debt Recovery Fund was established to finance TOR's accumulated debt resulting from under recoveries. A debt recovery levy was imposed on specified petroleum products. The debt burden
on TOR, however, remains high and threatens the financial viability of the country's banking system.
The government is, therefore, proposing an upward adjustment of the current Debt Recovery levy to retire the TOR debt and reduce its negative effect on the banking system.
Consequently, government proposes to increase the TOR debt recovery levy on premium and gas oil in the petroleum price build-up formula from GH�0.02 to GH�0.08 per litre.
Exemptions and Permits - to address revenue leakages through exemptions, government is developing clear criteria for evaluating
Parliamentary permits, waivers and granting exemptions with clear sunset clauses.
These include exclusion of personal exemptions beyond what the law permits and all import duty exemptions.
Granting special permits to personnel of health and teaching services on the vehicle imports was for a temporary period. To ensure fairness and equity to all tax payers both in the public and private sectors, this special permit is abolished across board in fiscal year 2011.
1. Bonded Warehousing- beginning in fiscal year 2011, the bonded warehousing facility will be restricted to only raw materials for manufacturing as originally intended.
Revenue and Grants
Total non-oil revenue and grants is estimated at GH�10,017.8 million, equivalent of 32.1 percent of GDP. The expected non-oil revenue and grants for the year represents a 13.5 percent increase over the projected outturn for 2010.
* Total revenue from oil into the budget is estimated at GH�584.0 million, equivalent to 1.9 per cent of GDP.
* Total oil and non-oil revenue and grants are thus estimated at GH�10,601.0 million of 34.0 per cent of GDP.
* Domestic revenue is estimated at GH�9,299.5 million, representing 21.5 per cent increase over the projected outturn for 2010.
* Tax revenue is estimated at GH�7,712.5 million representing 24.8 per cent of GDP. Non-tax revenue is expected to increase by 26.4 per cent over the projected outturn in 2010.
* Grants from development partners are estimated to increase to GH�1,301.6 million, equivalent to 4.2 per cent of GDP and accounting for 12.3 per cent of total revenue and grants.
Expenditure Proposals
Total expenditure for 2011 is estimated at GH�12,670.8 million, equivalent to 40.7 per cent of GDP. Of this amount, recurrent expenditure is estimated at GH�8,924.9 million, equivalent to 28.6 per cent of GDP and 70.4 per cent of total expenditure.
An amount of GH�3,745.9 million, equivalent to 12.0 per cent of GDP is estimated for capital expenditure.
Personal emoluments (Item 1) is estimated at GH�3,732.8 million, representing 12.0 per cent of GDP, due to the implementation of the Single Spine Salary Structure.
Total interest payments for fiscal year 2011 is estimated at GH�1,831.3 million, equivalent to 5.9 per cent of GDP, and 14.5 per cent of total
expenditure.
Of this amount, GH�459.1 million would be used to pay interest on foreign debt and GH�1,372.2 for domestic interest payments.
An amount of GH�262.2 million from oil revenue would be transferred to the Ghana National Petroleum Company to fund its investments activities.
Financing of the Deficit - The 2011 budget would result in an overall cash budget deficit of GH�2.3 billion, equivalent to 7.5 per cent of GDP. Net Domestic Financing of the budget is estimated at GH�1.2 billion and foreign financing is estimated at GH�1.1 billion.
Debt Sustainability Outlook for 2011 - Government is determined to ensure that it receives the best quality of external aid that does not lead to future debt sustainability problems. The key strategy of the new financing plan includes reducing cost by reducing concessional borrowing and monitoring the external debt indicators in relation to the sustainable thresholds.
In order to reduce the cost of domestic debt, Government will continue to exercise fiscal discipline to limit the increase in public sector
borrowing requirements. This would reduce domestic interest rates and permit the rolling over of existing debt at lower cost. Lower interest cost will free resources for productive expenditures.
KEY PRIORITY INTERVENTIONS- Government would continue with interventions that are consistent with the medium term objectives of this country as outlined in the GSGDA document and initiate new policies to sustain growth for development and job creation. The interventions would include the measures outlined below:
Priority Spending for 2011 - The Ghanaian economy is expected to grow significantly in the coming years with oil and gas coming on stream. Over the medium term, investment decisions would focus on the following key priority areas that are expected to drive the growth process. The areas are:
* Accelerating agriculture modernisation;
* Developing oil and gas industry;
* Developing critical infrastructure;
* Sustaining natural resource management and environment;
* Enhancing the competitiveness of the private sector; and
* Human resource development.
The 2011 budget will ensure significant investment in the areas of agriculture, rail transport, roads and highways, energy and housing in pursuit of government growth strategy.
Food and Agriculture has been allocated GH � 221.6 million for major interventions in food security, agriculture modernization and productivity.
The energy sector GH� 405.5 million for electrification, water resources, works and housing would receive GH�558.6 million for housing, potable water and other critical areas to accelerate growth.
The roads, highway and transport has been allocated GH �354.1 million for road construction in various parts of the country.
Under the social sector infrastructure, education and health have both
been allocated an amount of GH� 2.9 billion.
In addition, the MiDA projects in Agriculture, Transportation and Rural
Development programmes under an integrated agricultural development approach in 2011 would amount to GH �354.8 million.
The 547 million dollars Millennium Challenge Account Ghana programme, would be nearing completion by the end of 2011. Grant disbursement under the scheme to support Agriculture, Transportation and Rural Development
programmes in 2011 would amount to GH�354.8 million.
Agriculture - in the 2011 fiscal year, government would address the challenges by accelerating the modernisation and development of agriculture.
Cocoa Sub-Sector - The following interventions would take place in the cocoa sub-sector in the 2011 fiscal year.
* An amount of GH�104.4 million would be spent on the Cocoa Diseases and Pest Control Programme (CODAPEC) to mitigate the risks associated with the incidence of diseases and pests that attack cocoa. COCOBOD would spend GH� 10.2 million to intensify the treatment and control of cocoa swollen shoot virus diseases.
* The fertilizer subsidy policy would be harmonised between the Ministry of Food and Agriculture and COCOBOD during the year.
* An amount of GH�140.5 million has been set aside for the Cocoa Hitech Programme which would ensure that appropriate cocoa fertilizers are
available at the right time for use by farmers.
* The Special Housing Scheme for cocoa farmers would be supported with an amount of GH�868,000.
* The rehabilitation and tarring of selected roads in the major cocoa growing areas would continue in 2011.
* For the 2009/2010 cocoa crop year, an amount of GH�20 million has been set aside to complete roads under the Cocoa Roads Improvement Project (CRIP)
* The Cocoa Farmers Pension Scheme would commence in 2011 with an initial capital of GH�9.3 million.
The following interventions would be undertaken by the Millennium Development Authority (MIDA) as part of the Agriculture Commercialization Project.
* Disbursement of GH4 million under the Agriculture Credit to train farmer-based organisations;
* Completion of 14 agribusiness/buying centres;
* Completion of 3 communal pack houses in Mariakrom (Akwapim South), Otwekrom (Gomoa West) and Akorley (Yilo Krobo);
* Complete the construction of perishable cargo centre at the Kotoka International Airport;
* Construct 3,000 hectares irrigation schemes in Botanga, Golinga, Dadeso, Amate, Kpong Left Bank and;
* Extend the pilot land titling activity in Northern and Afram Basin zones (including land title offices)
Roads and Highway Infrastructure - the implementation of the following key projects would continue: Nsawam-Apedwa road project (Nsawam by-pass including bridges), Awoshie-Pokuase road, Tema-Aflao road development project (Lot1-Akatsi-Abgozome, Lot2-Abgozume-Aflao section and Akatsi bypass, Akatsi-Akanu road rehabilitation project (Lot1-Akatsi-Dzodze,
Lot2-Dzodze-Akanu & overlay for Akatsi-Dzodze, Techiman-Kintampo (Techiman-Apaso, Lot2 Apaaso-Kintampo), Ghana Urban Transport Project &
Transit facilitation and Transport Sector Development Programme.
Government would consider entering into pre-financing arrangements with financial institution and contractors to raise funds to complete such key projects like the Achimota-Ofankor, Tetteh Quashie- Madina, Nsawam-Apedwa
by-pass.
Efforts would also be made to build the capacity of local road contractors, ensure their proper classification and use, and develop the
institutional and regulatory arrangements to support effective and efficient movement of freight and passengers.
The following road construction projects would also be completed in fiscal year 2011.
* 346 kilometers of feeder roads in the Northern, Central, Eastern and Volta Regions to link food growing areas to the marketing centers;
* 75 kilometers Agogo to Dome trunk road in the Ashanti Region;
* 14 kilometers of the N1 Highway - Tetteh Quarshie to Mallam Junction - into a three-lane dual carriage way, including two interchanges at Dimples Inn and Mallam Junction.
Ministry of Energy - in the 2011 fiscal year, efforts will be geared at increasing access of households and industry to reliable and adequate energy supply and the diversification of the national energy mix to include the use of indigenous sources of energy. specific projects and programs to be implemented in the year include the following: Bui Hydroelectric Power
Project, Ghana Energy Development and Access Project, Ghana-Togo Benin 330kv Power interconnection project, Power systems reinforcement project, West African Power Pool (Phases 1&2), 30kv Aboadzi-Volta transmission line project and major activities in oil and gas.
Transport - Ghana's existing rail network is confined mostly to the southern part of the country which is economically more advanced and has a higher population density. Nonetheless, the current rail network is characterised by old tracks and rotten coaches, and inadequate railway
terminals, stations and platforms.
Government would source funds to rehabilitate and/or totally re-build and modernize the rail sector.
The recently commissioned Accra-Tema railway line would be extended from the Tema harbour area to Tema Community 1 to improve the suburban railway system. The rehabilitation of the Western line, which commenced in 2009, would be continued to facilitate freight movement in the Region.
Funds would also be made available to the Ministry of Transport to support the supply of 150 VDL buses for the Metro Mass Transport Limited and the Rural Transport Programme to improve inter/intra city movement of people and goods.
The Millennium Development Authority would undertake the following projects to support the efforts of the Ministry of Transport:
* Launching of two (2) new RoRo Ferries for the Volta Lake Transport Company at Adawso and Ekye Amanfrom
* Completion of Ferry Terminal / Landing Stages
* Removal of Tree Stumps in Volta Lake (5kms)
Ministry of Water Resources Works and Housing - government would enhance access to housing by commencing the construction of 200,000
affordable housing units in selected cities and towns across the country for which government has entered into the loan agreement with STX Company.
In addition, arrangement with private sector to raise funds to complete the affordable housing schemes which were started by the previous government would unfold during the year.
Implementation of some water projects would commence in fiscal year 2011: urban water project, rural water and sanitation project, Kpone water project, Kumawu, Konongo and Kwahu water supply and expansion projects, and Wa water supply and rehabilitation project.
Implementation of these projects would increase access to potable water, reduce the incidence of water borne diseases, and improve sanitation in the beneficiary communities.
Education - government would continue to improve enrolment, retention and quality of education at all levels of education through continued provision of free uniforms for children in basic schools in deprived communities. In addition, government will continue with its social interventions program of providing capitation grant, free exercise books and
school subsidies as well as the school feeding scheme.
To achieve MDG Gender Parity Index of 1:1 Government would provide support to needy girls as well as engaging in enrolment drive activities in collaboration with District Assemblies.
Health - in 2011, fiscal year the following interventions would be made in the health sector:-
* National Child Health Policy and strategy to increase access to Maternal, Newborn and Child Health services (MNCH);
* Implement the adolescent health policy
* Develop measures to ensure safe blood product transfusion;
* Strengthen surveillance, reporting and emergency response systems for the prevention and control of communicable & non-communicable disease.
* Improve case detection and management at health facility level
* Scale up the vector control strategy.
About 100 uncompleted and abandoned CHPS compounds would be completed, while an additional 30 would be constructed and equipped.
The National Health Insurance Scheme would continue to provide financial risk protection against the cost of basic/standard quality health
care for all residents in Ghana.
The following key projects would be undertaken in the 2011 fiscal year.
* Rehabilitation of Winneba District Hospital;
* Nutrition and malaria control for child survival
* Guinea worm eradication through water supply, sanitation and hygiene in the Northern region
* Construction works on District Hospitals at Tarkwa and Bekwai
* Refurbishment of the Tamale Teaching Hospital;
* Expansion of radiotherapy and nuclear medicine centre at Korlebu Teaching
Hospital and Komfo Anokye Teaching Hospital;
* Construction of three regional hospital with staff housing at Wa and Kumasi,
* construction of seven District Hospitals at Adenta/Madina, Twifo-Praso, Konongo-Odumase, Nkawkaw, Atibie, Tepa and Salaga;
* Construction of Blood Transfusion Centres at the teaching hospitals in Kumasi and Accra; and
* Continuation of the Bolgatanga regional hospitals rehabilitation project, Phase III.
* Construction of 5 polyclinics in Upper West, at Lambusie, Babile/Brifo, Ko, Wechau, and Han
Trade and Industry
The Government will continue to work with the various stakeholders to support the small and medium enterprise sector, private sector
development, industrial development and overall economic growth and job creation.
Industrial Policy
The government has approved a new Industrial Policy for the country, which focuses on Industrial Production and Distribution, technology and Innovation, The Support Program will be operationalized to drive the implementation of the Industrial Policy.
Further to support industrial Development and Local Industry the Government will work on comprehensive Industrial Development and
Competiveness Legislation for the development of local industries through the promotion of domestic content both in terms of human and material resources, and the transfer of technology.
The Government would begin work on the development of a Commodity Exchange to connect the buyers and sellers of locally grown agricultural commodities in an efficient, reliable and transparent manner by making use of innovation, technology and learning from International best practiced from the African Continent and beyond.
The Government would begin development of an Industr5ial salt Estate at Kata in the Volta Region to promote large-scale commercial salt
development. This will be in addition to ongoing SME salt development activities that are ongoing with UNICEF and the Global Alliance for Improved
nutrition.
MSME Development
The Government would establish an SME Database to provide up to date information on the operations and activities of SME's in various parts of the country. This is with a view to providing information and developing
relevant support services to the SMS Sector.
The Government would also commence the implementation of its programme to
rehabilitate and strengthen six craft village across the country.
The Ghana Standards Board would tighten inspection regime for the inspection of high-risk imported goods to reduce the dumping of substandard goods within the country.
The National Board for Small Scale Industries would organise 2000 tailor made entrepreneurial and technical improvement programs for 60,000 entrepreneurs. It will also support 1,800 MSE's to improve the packaging
and quality of their products.
It would establish 10 new Business Advisory Centres in 10 Districts to support MSE development.
Programme of Persons with Disability - The share of the Common Fund for person with disability is to be increased from the current two per cent to
three per cent in line with the social democratic tenets of the NDC of supporting the disadvantaged. District Assemblies are to ensure speedy releases of the funds to support the programme of persons with disability.