The President, Nana Akufo-Addo has finally given his approval to revised tax increases outlined in the 2019 supplementary budget.

Sources say the approval was given last week after the parliamentary approval of these levies and taxes.

The assent would pave way for the Ghana Revenue Authority (GRA) and Tax Division of Finance Ministry to work out the modalities to start implementing the taxes. Close sources say it could happen in early September.  

Background

Parliament before it rose for its break in July this year approved these revised taxes outlined in the 2019 budget. However, it took a little bit of time before the required presidential assent was secured.

Sources close to the Finance Ministry had told JoyBusiness was to help deal with all the legal hurdles before the President’s approval is secured for onward implementation.

The Finance Minister Ken Ofori-Atta in his Mid-Year budget presentation noted that “government is proposing to increase the tax from 6 to 9 per cent to develop the foundation for the creation of a viable technology ecosystem in the country”.

Parliament also approved a request to adjust upwards the Road Fund Levy, the Energy Debt Recovery Levy and the Price Stabilization and Recovery Levy to bring the ratios close to 21 per cent.

The luxury vehicles levy has, however, been scrapped following approval of these revised taxes by President Akufo Addo. Government had argued that the revision of these taxes is indeed to meet its end of year revenue target.

Finance Minister Ken Ofori in an interview with JoyBusiness was optimistic that based on these revised tax measures government would be able to meet its revenue target by the end of 2019.

Implementation of the taxes and impact on consumers

Sources close to the finance ministry have told JoyBusiness that the new taxes are likely to introduce from early next month.

That’s if the Ghana Revenue Authority (GRA) is able to quickly work with all the relevant government agencies on how these levies should be implemented. The implementation of these taxes would increase the cost of living and doing business in the country.

Communication Service Tax

The Finance Minister Ken Ofori-Atta proposed an increase in the tax which charges consumers of use of communication-related charges.

Based on the Parliament Act seen by JoyBusiness players in the sector are now required to charge about 9 per cent for the use of communication services.  

The Act also states that at least “20 per cent of the 6 percentage points of the tax shall be used to finance the National Youth Employment Program.”  

It also states that  Electronic Communication Usage means “amount chargeable by a service provider  for electronic communication service  usage other  the amount for Value Added Tax, Ghana Education Trust Levy and the National Health Insurance Levy.”

What about where the charge is for monetary consideration?  

Well based on the Act, that the amount under consideration excludes the amount of VAT, The Ghana Education Trust Levy and the National Health Insurance levy.

 How the tax would be worked out for consumers

According to the Telecoms Chamber, it is likely that this is how the tax would be worked out.

These are just projections; this is because every operator has its open pricing mechanism, “complexity of pricing and competition”.

But if you take a package of 100 of data, voice and SMS with all margins and cost added and then you work the tax.

CST was ¢6 then and ¢9

Levies was ¢5 then and ¢5

Subtotal ¢11 then and ¢14 now

Vatable figure is ¢111 then and ¢114 now.

Apply VAT of 12.5% get ¢124.87 and ¢128.25 now.

Energy Related taxes in the 2019 Supplementary Budget  

According to persons close to the National Petroleum Authority, the application of the energy-related revised taxes could result in a ¢0.20 addition to the exiting price buildup of petrol and diesel and ¢0.08 for a kilogram of LPG.

However one is not sure for now whether this could indeed result in the final price for the various products of the commodity going from September 1, 2019. This is because it’s likely that the Oil Marketing Companies may absorb it or pass it onto the consumers.

It is not clear whether the various tax agencies have been able to work out all the modalities for the revised taxes to indeed take over from September 1 2019.

Expected revenue from the revised taxes by the end of this year  

A breakdown of revised revenue estimates shows that the state could rake in an additional ¢513 million.

The data showed the energy-related revised taxes would bring the highest in terms what the state would realize by December this year, bringing more than ¢200 million.

The Review in the communication Service Tax which has been increased from 6 to 9 per cent should bring a little over ¢100 million, to help hit its end of year target of ¢524 million.