The government has announced that it will streamline the country’s tax regime to prevent large companies from abusing tax exemptions.
With Ghana losing about 5% of its gross domestic product (GDP) annually through excessive tax allowances for companies operating in the free zones, the government says it is putting in place measures to handle wasteful tax exemptions.
Delivering the 2022 Budget Statement in Parliament on Wednesday (17 November), the Minister for Finance, Ken Ofori-Atta, said that the government will lay the Exemptions Bill before the House in 2022.
Working through the new law, it will trim wasteful exemptions. The aim is to ensure that Ghana gains significant returns from companies which enjoy tax exemptions, he said.
“We wish to reiterate that we are in challenging times which require radical measures. So let us embrace these new policies to enable the government to address the fundamental issues affecting the economy; to ensure that, our nation continues to maintain its position,” the minister said.
More reliefs for textile industry
Ofori-Atta also announced a two-year extension of the value added tax (VAT) relief on African prints for textile manufacturers based in Ghana.
The extension is to enable the manufacturers to resuscitate their operations, the minister said, and produce affordable textiles for the market.
Limits on VAT flat rate
Ofori-Atta also announced that the 3% flat rate of VAT on supply of goods by wholesalers and retailers, which was introduced in 2017, will now be limited to retailers. All other supplies of goods and services will attract the standard rate, he said.
The Minister for Finance said that the object of the flat rate is to provide a simplified system for small-scale enterprises.
To ensure that this objective is achieved, the rate will apply to retailers with an annual turnover not exceeding GHC500,000. Wholesalers and all other retailers will pay the standard rate, he said.
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