2007 ghana budget highlights

8/14/2019 2007 Ghana Budget Highlights

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PricewaterhouseCoopers Ghana Budget Highlights: Overall Summary

Overall Summary2007 Budget: The Golden Jubilee Budget but is it golden for thetaxpayer?

Focus will be on growth within anenvironment of economic stability

The Economy

For the second time in Ghana, theBudget was read before the beginningof the new fiscal year.

The focus of the 2007 Budget is on thefollowing:

Private Sector Development

Human Resource Development

Good Governance and CivicResponsibility

2006 Performance

Target

Actual(projected)to end of2006

Real GDPgrowth

6.0% 6.2%

12-monthCPI inflation

7%-9%10.5%(October)

Grossinternationalreserves

4 Monthsimports

3.6 Monthsimports

Domesticprimarydeficit

1.4% ofGDP

2.1% ofGDP

Overallbudgetdeficit

2.1% ofGDP

4.9% ofGDP

DomesticDebt-GDPratio

8.7% 10.1%

The government has indicated itscommitment to Ghanas obligations

under the extended West AfricaMonetary Zone Programme (WAMZ)and as such it will support the quotingand trading of national currenciesacross the WAMZ. The government isalso encouraging commercial banks inthe country to engage in the trading ofthese currencies.

The government has expressedcommitment to the efforts of theEconomic Community of West African

States (ECOWAS) in having acommon external tariff for the regionby the end of 2007 but it plans toprotect agricultural and industrialsectors against strong competitionfrom imports, in the form of highertariffs, with the introduction of theECOWAS Common External Tariff(CET).

The governments macroeconomicpolicies, strategies and targets for2007 are in line with the

macroeconomic framework outlined inthe Growth and Poverty ReductionStrategy II (GPRS II).

2007 Fiscal Year Projections:

GDP growth of at least 6.5%;

Single digit end of period inflationbetween 7% and 9%;

Average inflation of 8.8%;

2007 Budget Highlights*

*connectedthinking

The 2007 BudgetStatement andEconomic Policywas delivered toParliament onThursday, 16November 2006by Hon. Kwadwo

Baah-Wiredu,M.P. and Ministerof Finance andEconomicPlanning

We outline in thispublication theprincipal matterscovered by theHonourableMinister in hisaddress

In this Issue:

OverallSummary

The Economy

DirectTaxation

Value AddedTax

Customs &Excise

SectoralOutlook

We would pointout that changeshave been madein prior years tothe proposalsmade in theBudget Statementbefore therelevant bills havebeen published

and enacted


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PricewaterhouseCoopers Ghana Budget Highlights: Overall Summary 2

Overall Summary

Accumulation of internationalreserves to at least threemonths of import cover;

Domestic primary deficit of0.6% of GDP; and

An overall budget deficit of3.2% of GDP.

Direct Taxation

To encourage land title registrationand investments, a one yearinterest waiver amnesty has beenintroduced on rent owed to thegovernment.

In addition, land title registration

fees will no longer be based on thevalue of the land but rather at flatrates.

Various tax reliefs for individualshave been increased.

The taxation of accommodation andvehicle benefits in kind has beenrevised. This revision will decreasethe taxable benefit foraccommodation but in most cases

increase the taxable benefit onvehicles to employees.

A Tax Arbitration Board is to beestablished to spur transparency intax administration and expediteresolution of appeals.

The National Reconstruction Levy(NRL) is completely abolished witheffect from 1 January, 2007.

Tax incentives including 10-year taxholidays, exemptions from dividendand capital gains tax have beenannounced for venture capitalfinance companies.

All persons who invest in venturecapital finance companies will havetheir investments deductible for taxpurposes.

The withholding tax rates ondividends and rent will be reduced

to the rate of 8%, while thatapplicable to management andtechnical fees will be reduced to15%.

During 2007, government plans todevelop and implement a systemthat will enable the government to

assess and collect income tax usingthe value of vehicles registered.

The government remains focussedon entering into double tax treaties toeliminate double taxation on incomesearned in Ghana.

Capital gains tax is to be reduced tothe rate of 5%.

Value Added Tax (VAT)

In addition to the existingrequirement to obtain an income taxclearance certificate (TCC), taxablepersons will now be required toobtain a VAT clearance certificate totender for contracts and to cleargoods from the ports.

VAT on packaging materials used inthe production of drugs for thetreatment of HIV/AIDS, tuberculosis

and malaria will be removed.

All pharmaceutical products will bezero rated.

Customs and Excise

To rationalise the indirect taxregime and bring it in line withinternational trends, excise dutiesare generally no longer to becalculated on an ad valorem basis.

Excise duties on beer, stout,branded spirits, wines, malt drinks,carbonated soft drinks, cigarettesand other tobacco products will betaxed at specific duty rates.

Government intends to review thecurrent import duty exemptionregime to eliminate abuse and totarget the productive sectors of theeconomy.


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Overall Summary

The concessionary rate on rawmaterial imports has been reducedto 5%.

Sectoral Outlook

Agriculture

Ministry of Food and Agriculture(MOFA) will focus on the policiesand programmes aimed atenhancing agricultural output inorder to achieve poverty reductionas well as food security in thecountry.

To ensure the welfare of cocoafarmers, the government hasresolved to pay a bonus for cocoapurchases for the 2005/06 main

crop season.

The government is also to promotethe use of local rice and poultry byall public institutions.

Energy

In response to the increasingdemand for energy in the country,the government will restore and

upgrade various energy generatingfacilities. The government, incollaboration with its developmentpartners, will initiate new energygeneration projects around thecountry.

The Petroleum Exploration law isexpected to be reviewed in order tomake Ghana an attractivedestination for investments in hydrocarbon exploration.

The government has also reiteratedits commitment to fully implementthe liberalisation of the downstreamsector. In the context of theliberalisation, the private sector willbe allowed to import crude oil forrefining.

Tourism

As part of promoting Ghana as a

tourist destination, the government

intends to continue its participationin major international fairs and willembark on a strategy of promotingdomestic tourism within the country.

Road Infrastructure

The key milestone for the country is

to become a transport hub for WestAfrica. To achieve this, thegovernment will be pursuing anumber of measures during the2007 financial year. Key amongthese is continuing with themaintenance and completion of on-going projects as well as initiatingnew development projects. Thesedevelopments will largely befinanced with the support of thenations development partners.

To raise additional revenue for roadmaintenance, the government hasproposed an increase in the fuellevy of US$0.02 as well asincreases in other road user feesand levies.

In a bid to enhance transportmanagement, the government willbe developing strategies tosystemise annual registration ofvehicles in the country.

Information Communication Technology(ICT)

During 2006 the telecommunicationindustry experienced significantgrowth marked by increasedsubscriber numbers.

The government will focus ondeveloping the legal and regulatory

framework for the sector. Inaddition, it will adopt ICT in itsoperations in order to promoteaccountability, transparency andefficiency in its service delivery.

Health

The National Health Insurance Fund(NHIF) experienced a growth in itsregistered members in 2006 and thetarget is to continue expanding the

coverage in 2007. The governmentwill also continue to intensify its


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Overall Summary

efforts at improving access toquality and affordable healthservices to all Ghanaians. Toachieve this, the sector ministry andallied agencies are expected toimplement programmes that willinvolve capital investments in thehealth sector, capacity developmentthrough personnel training,

promotion of healthy lifestyles, andan increase in funding for the fightagainst HIV/AIDS, malaria andguinea worm among other commondiseases.

Good Governance

The focus of the good governancestrategy under the GPRS II is toempower state and non-stateentities to participate in the

development process, as well as topromote peace and stability in thecountry. To achieve this objective,the government will continue topromote effective, responsible,transparent and accountable statemachinery. The government willalso strive to create an enablingenvironment for the private sectorand continue to support efforts toaccelerate growth and reducepoverty.

Diversifying Sources of Funding

Based on Ghanas B+ sovereignrating, the government intends toenter the international capitalmarket as a sovereign borrower todiversify and broaden its fundingoptions whilst requesting access tothe International Bank ofReconstruction and Development(IBRD) arm of the World Bank.

Towards a Fair Wage

The government has indicated itscommitment to undertake a holisticpublic sector wage reform whichaims to achieve competitivenessbetween public sector incomes andthose of the private sector. Thecomprehensive pay reform isexpected to be phased in over athree-year period. The new salary

scheme will replace the GhanaUniversal Salary Structure (GUSS)

and establish the Fair WagesCommission which will be taskedwith the responsibility ofadministering the newcomprehensive pay structure.

New National Passports

New passports with enhancedsecurity features that meet therequired international standards areto be introduced. Additionally,electronic visa processing systemsare to be introduced at the variousconsulates.

Ghana Investment Corporation

The government is to establish theGhana Investment Corporationwhich will encourage private sectorparticipation in the financing ofinfrastructure projects that will haveeconomic returns. This entity isearmarked to acquire shares ininternational and multinationalcompanies that purchase rawmaterials from Ghana forprocessing.

Human Capital Development

Members of parliament are to beallocated 51.75 billion from theHeavily Indebted Poor Countries(HIPC) Funds for humandevelopment programs in theirconstituencies.


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PricewaterhouseCoopers Ghana Budget Highlights: The Economy 5

Overall Summary

The Economy

Golden Jubilee Budget

Focusing on growth within an environment of economicstability towards economic renaissance

The Economy in 2006

Based on the significantimprovement in the socio-economiclandscape over the past six years,the government is confident that it ison schedule to achieve MiddleIncome Status by 2015 target. Thisconfidence is further buoyed by the

improvement in the countrysinternational ratings.

The growth in the domesticeconomy in 2006 corresponds withgrowth in the world economy.

In spite of challenges posed to mosteconomies by high crude oil prices,consumer spending andgovernment infrastructure financingcontinued to spur on economies to

positive growth. Economies suchas, the USA, Japan, China and theEuro Zone contributed significantlyto this growth. Low incomecountries also rode on the back ofbuoyant prices on the commodities(oil and metals, especially gold)markets to record reasonablegrowth rates.

Ghana, in spite of the slower growthprojected for Sub-Saharan Africa, is

likely to achieve its key macro-economic targets for 2006:

Real GDP growth of 6.2% isprojected, ahead of the target of6%. The agriculture sectorcontributed 35.8% of GDP, theindustrial sector 25.4% and theservice sector 30.1%;

End year-on-year inflation asmeasured by changes in CPI

was reported at 10.5%.Inflation is expected to end theyear at 11.2%;

The average inflation rate isprojected to end the year at11.8%;

Gross international reserves areprojected to fall from 4 monthsimport cover (2005) to 3.6months;

The domestic primary deficitwas reported to be 2.1% ofGDP (end of September 2006),compared to a target of 1.4%;

The overall budget balance wasin deficit at 4.9% of GDPcompared to the years target of4.5% of GDP;

The average commerciallending rates generallydecreased, underpinned by a


*connectedthinking

Focusing on growth

within an environment ofstability for economic

renaissance

Year end inflation isexpected to be 11.2%

Driving national

development throughPrivate Sector

Development

Human Resource

Development and

Good governance and

Civic Responsibility.

Overall budget balance

in deficit of 4.9%

compared to a targeted

4.5% of GDP.


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The Economy

stable Bank of Ghana (BoG)policy rate. The BoG prime ratewas dropped 100 basis pointsin January 2006 and has sincebeen maintained at that level;and

As at September 2006, the cedihad remained relatively stableagainst foreign currencies; itdepreciated by 9.5% againstthe British Pound, 7.8% againstthe Euro and a moderate 0.9%against the US Dollar.

Fiscal Performance

The overall budget balance out turnwas a 4.9% deficit of GDP

compared to a 3.8% deficit in 2005.The domestic primary balanceworsened, being at 2.1% deficit ofGDP compared to a 0.7% surplus ofGDP in 2005.

Total receipts at the end ofSeptember 2006 outperformed theresults for the 2005 correspondingperiod, helped partly by 1,826.4billion Multilateral Debt ReliefInitiative (MDRI). Provisional

figures for total payments recordedan increase for the first nine monthsof 35% over the previous yearscorresponding period.

By the end of December 2006, totalreceipts are projected to be41,357.1 billion of which domesticrevenue is expected to be25,421.5 billion with the othersignificant revenues from grants(7,228.6 billion) and loans(5,759.3 billion).

The total payments for 2006 areprojected at 41,357.2 billion. Thisis made up of statutory payments of13,006.5 billion and discretionarypayments of 28,350.7 billion, bothof which represent slight savings inoriginal annual budget estimates.

Monetary Policy

The policy implemented by the BoGwas targeted at inflationmanagement in the face of risingcrude oil prices on the world market.

This resulted in the inflation rategenerally declining over the firstthree quarters of 2006.

The year-on-year growth rate ofreserve money at the end ofSeptember as compared to the

same period in 2005 reduced from19.3% to 16.7%.

Fluctuations in the interest ratewere quite low. The BoG cut theprime rate by 100 basis points atthe start of the year and moneymarket rates declined during mostof the year. However, DepositMoney Banks (DMBs) did notchange their lending ratessignificantly over the review period.

Credit growth has been strong todate at 31.7%. Outstanding credit(in real terms) increased by 17.4%,with a greater proportion of thisgrowth channelled to the privatesector of which the services sub-sector was the largest beneficiary.Credit to GDP ratio was 20.9% asagainst 18.6% for the same periodin 2005. As at the end ofSeptember 2006, the private sectorshare of credit was 81.6% as

against 77.4% for the same periodin 2005.

Depreciation of the cedi against thecountrys major trading partnerswas well managed.

Balance of Payments (BOP)Outlook for 2006

The overall balance of payments is

projected to be a surplus ofUS$178.8 million by the end of theyear as compared to the surplus ofUS$84.34 million in 2005. Thishealthy surplus expectation isfuelled by anticipation of higherexport receipts resulting from strongcommodity prices, and debt reliefunder the MDRI.

Developments in the West AfricaMonetary Zone (WAMZ)

The countries in the WAMZgenerally made progress towardsachieving the convergence criteria

Total receipts at

December 2006 are

expected to be

covered by total

payments of 41.4trillion.

Despite the significant

lowering of the Bank of

Ghanas prime rate,

Deposit Money Banks

did not reciprocate by

significantly lowering

their lending rates.

World commodity

prices and debt relief

under MDRI determine

the overall favourable

balance of payments

projections.

General progress

made towards

achieving

convergence criteria.

Appreciably, three out

of five WAMZ

countries achieved

single digit inflation in

June 2006.


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The Economy

targets. The macroeconomicenvironment was generally good inthe first part of 2006; modest growthwas recorded in all countries, withreduced inflation and improvedexternal positions. Three out of thefive WAMZ countries (Gambia,Guinea and Nigeria) achievedsingle digit inflation in June 2006.

Major Socio-economicDevelopments in 2006

The Electricity Power Sub-SectorCrisis

Ghana suffered a serious setback inits electricity sub-sector. Low waterlevels in the Akosombo Dam and

high petroleum product pricesforced an extensive country-wideload management programme, asthe VRA was unable to generateadequate electricity for industrialand domestic use.

With some improvement in rainfallpatterns, it is likely that water in theAkosombo Dam will rise to 247 ft bythe end of 2006. However, theexpected 247 feet level, which falls

within the period of the dry season,is critically low compared with themid-point operating level of 259feet. This level will require VRA tocontinue to manage electricitysupply from its Akosombo plant, atleast into the first half of 2007.

This situation has causedGovernment to reconsider itsenergy reform strategy to addressthe current crisis and to prevent arecurrence in the medium-to-longterm.

Deadlock on Public Wages andSalaries

For the first three quarters of 2006,wages and salaries amounted to8,422.5 billion, higher than thebudgeted amount of 7,588 billion.This is projected to hit 10,972.5billion by the end of 2006, thereby

exceeding the budget of 9,999billion. During the year there were asignificant number of labour issuesinvolving public sector workers.

Medical doctors, nurses,polytechnic teachers, members ofthe Teachers and EducationWorkers Union (TEWU), andgraduate teachers (NAGRAT)engaged the government at varioustimes over the perceivedinadequate salary levels.

Overview of MacroeconomicFramework for 2007

GPRS II will continue to provide theguiding framework for 2007. Keymacro-economic targets set out inthe 2007 budget include:

Real GDP growth of at least6.5%;

End of year inflation of between7% and 9%;

Average inflation rate of 8.8%;

Accumulation of internationalreserves to a target of at least 3months of import cover;

Domestic primary deficit of0.6% of GDP; and

An overall budget deficit of3.2% of GDP.

To achieve the above targets, thefollowing policies will be applied:

Prudent fiscal policymanagement;

A monetary policy that is flexibleenough to respond to externalshocks, promote growth andensure price stability;

Real interest rates that enhanceeffective mobilisation of savingsand make credits affordable tothe private sector; and

Relatively stable real exchangerates that promote internationaltrade.

Electricity sub-sector crisis

during the year has

caused government to

reconsider its energy

reference strategy to

accommodate a much

wider medium-to-long term

initiatives

In the short-term

government must however

steer the course of

delivering non-

hydroelectric power

generation of about 500

megawatts to complement

the current inadequate

generation capacities.


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The Economy

Furthermore, structural constraintsat the policy and institutional levelsthat impede increased productivity,adoption of technology andcompetitiveness of the privatesector with respect to agriculture,industry and service will beaddressed.

Resource Mobilisation

Total revenue collection for 2007 isprojected at 54,315.9 billion, ofwhich domestic revenue isprojected at 37,532.2 billion. Thetax revenue agencies are expectedto collect 32,533.1 billion, which isequivalent to 23.6% of GDP. The2007 tax revenue projection

represents a growth of 39.5% overthe projected outturn for 2006.

The government plans to derive itsrevenues mainly from direct taxes,import taxes, VAT, duties and loans.To achieve the revenueperformance, it will be necessary toenhance the capacities of therevenue agencies to collect thetaxes and develop systems toprevent revenue leakages. Inaddition, project loans, which

account for a large portion ofgovernment loans, will have to bewell negotiated to achieve besteconomic cost.

Resource Allocation

Total payments are estimated at54,315.9 billion, made up ofstatutory payments of 14,818.1billion and discretionary paymentsof 39,497.8 billion.

Out of the discretionary paymentspersonnel emoluments areestimated at 13,167 billion,indicating a 20% increase over theprojected outturn for 2006 andrepresenting 33.3% of totaldiscretionary payments for 2007.The level of personnel emolumentsalso constitutes 41.5% of totaldomestic revenue, and 9.6% ofnominal GDP.

Total investments (excluding thosefinanced by statutory funds) are

also programmed to form about29.3% of total discretionarypayments, 40.7% higher than the2006 projected outturn.

The overall budget deficit isexpected to be 3.2% of GDP at the

end of 2007. The domestic primarybalance is targeted at 0.6% of GDPand the domestic debt-to-GDP ratiois projected to be 7.9%.

The drivers for these expectationsare commodity prices and crude oilprices cocoa and gold are bothexpected to perform strongly onworld markets; oil prices areexpected to remain in excess ofUS$50 per barrel.

Monetary Policy Outlook

The BoG is expected to continue toimplement a monetary policy aimedat containing inflationary pressureand reducing inflation to a singledigit by the end of the year. Broadmoney is therefore projected at amore restrained rate of 21.4%. Amore aggressive target of 22.6%would be pursued for growth in

reserve money.

The External Sector and Balanceof Payments Outlook

The government envisages thatexternal financing requirements willcontinue to be high. Merchandiseexports are still expected to drivedomestic growth and alleviatepoverty. The countrys oil bill isexpected to be US$1,618.2 million.

Merchandise exports are projectedto reach US$4,105.5 million.Together with transfers, the currentaccount is expected to close indeficit at US$619.7 million. Anexpected net inflow from a mix ofdebt, equity and other investmentswill leave, the overall balance ofpayments at a surplus of US$198million.

Private Sector Competitiveness

In line with GPRS II, the privatesector is considered the key vehiclefor accelerated growth and

The macroeconomic

environment appears

stable with GDP growth at6.5%. However

international reserves,

domestic primary surplus

and overall budget deficits

are projected to deteriorate

over the previous years

targets.

2007 revenue target is

40% higher that 2006

projections.

Capacities of revenue

agencies to be enhanced,

however there should be

better negotiations on

project loans to achieve

best economic cost.

Total receipts at December

2007 are expected toequal total payments at

54.3 trillion.

Merchandise exports will

play a critical role in

achieving surplus on the

balance of payments. But

this would need to be

supported by debt, equity

and investments into the

economy.


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The Economy

development. Government policiesand programmes will continue tofocus on the agriculture, industryand services sectors to addressstructural constraints that impedeincreased productivity andcompetitiveness of the privatesector.

Public Sector Salaries and Wages

A wage bill of 13.2 trillion,representing 9.6% of GDP and33.3% of total discretionaryexpenditure is projected.

Phase 1 of the implementation ofthe public sector pay reform hasresulted in the removal of distortions

in the GUSS. Phase II involving theassessment of the job content andthe consequential placement of allpublic sector employees will becompleted in 2007. A Fair WagesCommission is to be established toadminister a new comprehensivepay structure.

Multilateral Debt Relief Initiative

A total of US$4 billion is expectedas a debt relief package in respectof outstanding obligations to theInternational Monetary Fund (IMF),the World Bank and the AfricanDevelopment Fund over 50 years.The objective is to augment thecurrent level of public investment toaccelerate the achievement of theMillennium Development Goals(MDGs) and GPRS targets.

For 2007, with expected inflows

from MDRI of 1,598.65 billion andHIPC debt relief of 2,210.83 billion,planned total poverty reductionexpenditure will go up to 12,926.83billion representing 32.7 per cent ofthe total government expenditure.

The Power Sector

The government plans to increasegeneration capacity through variousmeasures. Additional power supply

generated upon implementing thesemeasures is expected to be1,141MW.

These measures includecollaboration between the VRA andthe mines, the relocation of theOsagyefo barge to Tema, and theprocurement of a new plant togenerate some 125MW of thermalenergy. In the long-term the BuiDam is expected to augmentenhanced generating capacity.

All the funds for MDRI for 2007have been voted for the energysector to support the funding of theproposed short-term solution to theenergy crisis. The MDRI total of1,598.65 billion has been allocatedentirely to the VRA to be used tofund the procurement of gasturbines and a barge.

A Summary of Sectoral GrowthProspects

The agricultural, industrial andservice sectors are expected togrow at 6.1%, 7.7% and 6.7%,respectively. Highlights of keyprogrammes driving these growthrates include:

Under the Food Crop

Development Project (FCDP),1,500 eligible farmers will begiven credit support totalling5.3 billion (US$584,000);

The Livelihood Empowermentagainst Poverty (LEAP) pilotsocial grants scheme will bedeveloped in 2007 with supportfrom the HIPC fund;

The first phase of the

Millennium Challenge Account(MCA) project takes off in 2007with estimated expenditure ofUS$74.8 million;

The government is to support atleast 5 large and 10 mediumand small scale salt producersto expand production in thecoastal basins of Western,Central, Greater Accra, andVolta Regions;

20,000 hectares of oil palm willbe planted and one specialized

The wage bill appears high

taking a significant portion

of the GDP. Policies and

initiatives are proposed to

look at the whole public

sector salaries and wages

policy. Any policy

initiatives would need to

build on any previous

government initiative to

achieve synergies.

Emphasis on productivity

should be key!

IMF, WorldBank and theAfrican Development Bank

to forgive a total of US$4

billion.

Millennium Challenge

Account (MCA) project

takes off in 2007.


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The Economy

technology centre for valueadded oil palm products will beestablished;

The National Board for SmallScale Industries will organize500 tailor-made business

improvement programmes for15,000 entrepreneurs by theend of 2007;

200,000 employmentopportunities will be created;and

The government is to implementthe National EmploymentProgram (NEP).

General Comments

Although GDP growth is stable, it isclear that the economy ischallenged with shocks from theenergy sector with respect to risingworld market crude oil prices andlow electric power generation.Difficulties regarding effectivemanagement of public sectorsalaries and wages have also

added to the challenges facingpublic expenditure managementthereby affecting the overall budgetdeficit.

It is however noteworthy thatgovernment plans to put in placepolicies and initiatives both short-term and medium to long-term toaddress the energy and publicsector salaries and wages issues.The responsible governmentministries departments and

agencies should therefore focus onthe overall growth of the economyand therefore assist with thedispassionate implementation of allpolicy initiatives.

Government is focused on growthwithin an environment of stability totrigger off and sustain a trueeconomic renaissance for Ghana.Government plans to continue topursue its strategy of economic

development through effective

private sector, human resourcedevelopment and good governance.

A snapshot of the macroeconomicenvironment shows that, overallthere are challenges to sustainingthe stability achieved over the past

four to five years. A summary of themacroeconomic indicators (table)below shows that although theeconomy did well in achieving 6.2%GDP growth over the target of6.0%, it did not attain most of theother key indicators. End-of-yearinflation was down by 2.2%, importcoverage reserves deterioratedfrom 4 months to 3.6 months,domestic primary balance was indeficit of 2.1% against projecteddeficit of 1.4%, whiles overall

budget deficit fell from 4.5% to 4.9%of GDP.

To meet the challenges ofunderperformance in the othermacroeconomic indicators,government has provided directionsto reduce inflation to a single digitand reduce domestic primary andthe overall budget deficit. Forexample, to balance the budget,government intends to borrow and

obtain grants to augment itsrevenue inflows. Domesticborrowing, higher public sectorwage bill, anticipated energy costs(electricity and fuel), for example,would be a challenge to achievingthe macroeconomic targets.

2006Projected

2006Outturn

2007Projected

Real GDPGrowth 6.0% 6.2% 6.5%

End of year

inflation 7% - 9% 11.2% 7% - 9%Averageinflation 8.8% 11.8% 8.8%

Internationalreserves toimport cover 4 months 3.6 months 3 months

Domesticprimarybalance % ofGDP -1.4% -2.1% -0.6%

Overall BudgetDeficit % ofGDP 4.5% 4.9% 3.2%


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PricewaterhouseCoopers Ghana Budget Highlights: Direct Taxation 11

Direct Taxation

Expectation gaps still persist.

Final Withholding Taxes

Final withholding taxes ondividends, management andtechnical services, and rent havebeen reduced.

The following reduced rates will beapplicable from 2007:

Dividends - 8% (previously10%);

Management and technicalservices - 15% (previously20%); and

Rent - 8% (previously 10%)

The government has attempted toreduce these withholding taxes tobring them in line with the reductionsin corporate income tax from 32.5%to 25% over the past 5 years.

This reduction is a positive move,however, we believe that for thecountry to remain competitiverelative to other African countries,withholding tax on services providedwithin and outside of Ghana shouldfurther be reduced.

Other final withholding taxes oninterests, branch profits, royalties

and insurance premiums should,also be proportionately reduced.

Capital Gains

The capital gains tax rate has beenreduced from 10% to 5%.

The change was made toencourage the public to registerchanges in the ownership of

properties.

National Reconstruction Levy

The elimination of the NRL to allcompanies, which had previouslybeen announced in the 2006 budgethas been reconfirmed.

It is good to see that this temporarytax, which was introduced in 2001,has finally been abolished for allcompanies.

Taxation of Benefits in Kind

The rates associated with calculatingbenefits in kind with regards toaccommodation and vehicles havebeen reduced as follows:

Accommodation

Accommodation with furnishing the calculation of the benefit

Final withholding

taxes reduced for

dividends,

management and

technical services,

and rent payments

Capital gains tax

reduced from 10% to

5%

National

Reconstruction Levy

eliminated for all

companies


*connectedthinking


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Direct Taxation

has been reduced from 15% to10% of the persons total cashemoluments;

Accommodation only thecalculation of the benefit hasbeen reduced from 10% to

7.5% of the persons total cashemoluments; and

Shared accommodation thecalculation of the benefit hasbeen reduced from 5% to 2.5%of the persons total cashemoluments.

Vehicles

Vehicle with fuel thecalculation of the benefit hasbeen reduced from 15% to 10%of total cash emoluments; inaddition, the maximum amountthat can be included as abenefit has been increasedfrom 300,000 to 3,000,000;

Vehicle only the calculation ofthe benefit has been reducedfrom 7.5% to 5% of total cash

emoluments; in addition, themaximum amount that can beincluded as a benefit has beenincreased from 150,000 to1,500,000;

Fuel only the calculation ofthe benefit has been reducedfrom 7.5% to 5% of total cashemoluments; in addition, themaximum amount that can beincluded as a benefit has beenincreased from 150,000 to1,500,000; and

Driver, vehicle with fuel thisnew category has been addedand the calculation of thebenefit is 12.5% of total cashemoluments; the maximumamount that can be included asa benefit is 3,500,000.

Whilst these benefits may reduce the

tax burden on some individuals whohave accommodation provided by thecompany, they will not benefit allworkers and an adjustment to the

personal income tax rates or thewidening and increasing of the bandswould have been more appreciated.

Furthermore although thepercentages have decreased incalculating the tax benefits on

vehicles because the maximumbenefits has not been raised tentimes the previous amount, in mostinstances this will result in greatertaxes for individuals with employerprovided vehicle or fuels.

Tax Reliefs for Individuals

The government announced that inline with its objective of increasingdisposable income of taxpayers, the

following increases in tax reliefs areproposed:

Marriage/Personal relief raised from 300,000 to350,000 per annum;

Old Age relief raised from300,000 to 350,000 perannum;

Childrens Education/Child relief raised from 240,000 to300,000 per annum;

Aged Dependent relief raisedfrom 200,000 to 250,000 perannum; and

Cost of Training relief raisedfrom 200,000 to 1,000,000per annum.

Whilst these increases are welcomenews for taxpayers, the governmentsobjective of increasing disposableincomes of taxpayers would havebeen better accomplished bybroadening the bands and/orreducing pay as you earn (PAYE) taxrates.

Venture Capital Tax Incentives

The government-sponsored VentureCapital Trust Fund has signed twoinvestment agreements with venturecapital finance companies; however,

Tax reliefs forindividuals

increased

No change in

personal income

tax rates

Benefits in kind

calculations for

individuals on

accommodation

and vehicles are

adjusted


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Direct Taxation

the government would like to seemore venture capital financecompanies involved in the scheme.

In this regard the followingenhancements to the program havebeen announced:

Full tax exemption fromcorporate income tax, dividendtax and capital gains tax hasbeen extended from five yearsto ten years;

Losses from disposal of theshares may be carried forwardfor up to five years afterdisposal (whereas previouslythe five year carry-forward was

only available up to five yearsafter the tax exempt periodexpired);

Distributions of interest,dividends and capital gains toinvestors in venture capitalfinance companies shall be taxexempt; and

The 100% chargeable income

deduction granted to financialinstitutions investing in venturecapital finance companies isnow extended to include allcorporate and individualinvestors who invest in venturecapital finance companies.

This is a positive step in thecontinued support of the venturecapital industry in Ghana.

Title Registration on Land

As part of the governments initiativesto encourage land registration andinvestment, the following proposedchanges have been recommended:

First, the government will waiveany interest on arrears of rentowed to the government bylessees for 2007; and

Secondly, to encourage titleregistration, fees on landregistration will no longer be

based on land value but will bebased on flat rates, as follows:

Up to 1 acre - 350,000;

1 acre to 100 acres -500,000;

Above 100 acres - 10,000for each additional acre;

Mortgages - 350,000; and

Discharge - 100,000.

These new initiatives may encourageland registration.

Establishment of Tax ArbitrationBoard (TAB)

To enhance transparency in taxadministration and expedite theresolution of appeals, thegovernment is proposing theestablishment of a TAB.

The TAB will decide on appealsagainst the decisions of the RevenueCommissioners. The RevenueAgencies Governing Board willfacilitate the setting-up of the TAB.

Any agencies that are put in place tofacilitate disputes taxpayers mayhave with the authorities must beapplauded and hopefully the TAB willbe as efficient in resolving issues asthe Fast Track High Courts.

Broadening the Income Tax Base

The government has indicated that a

significant percentage of vehicleregistrations is done by the informalsector operators, most of whom arenot taxpayers.

Any additional measures that willbroaden the tax net to bring in moretaxpayers should be supported andhopefully, this will result in less taxburden on those currently bearing thetax costs of non-paying taxpayers.

Venture capital tax

incentives

increased

Tax Arbitration

Board established

Land registration

initiatives put in

place

Strategy to

broaden tax net


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Direct Taxation

More Double Tax Treaties to beconcluded

DTTs with Sweden and Switzerlandhave been initiated and should becompleted in 2006.

DTTs are also being pursued withSyria, the Netherlands and the CzechRepublic.

The pursuit of additional DTTs is trulya positive decision and should makeGhana more competitive in attractinginvestors from these countries.

However, it is also important toensure that once signed, DTTs are

properly and timeously implemented.

Comments

The government stated that it isdetermined to promote the practice ofefficient taxation and enhanceconfidence in the tax system.

In addition, the government restatedits commitment to introducingmeasures that seek to remove thebottlenecks that impede revenuegeneration and collection.

Whilst some of the concerns of someindustries have been addressed, theconcerns of many others have notbeen considered.

For example:

The non-availability of losscarry-forwards to all companies;

Withholding tax rates on localgoods and services have notbeen reduced to reflect currentincome tax rates;

Additional bureaucracyintroduced that requires thetaxpayer to receive a VATclearance certificate at a time

when it is already burdensometo receive an income taxclearance certificate;

The need for personal tax ratesto be reduced or the bandswidened to put more disposable

income into taxpayers pocketsin line with the new fair wagepolicy;

The absence of adequatedefinitions and terminologyunder the Tax Code to reducemisunderstandings between thetaxpayers and the taxauthorities;

The need for the government toimplement a computerisedsystem that allows the sharingof information between thevarious agencies to reducedelays and errors in informationprovided to taxpayers;

Ensuring the timely issuing ofTax Clearance Certificates andWHT certificates;

Allowing exporters to issue VATRelief Purchase Orders on theirmain taxable inputs;

Introduce a mechanism to allowthe offset of taxes refundableagainst other forms of taxespayable; and

Banks subjected to the samebad debts provisioningrequirements as other

companies when their businessis inherently different to othercompanies.

It is expected that the governmentwould relentlessly work towardsresolving these concerns oftaxpayers to improve its relationshipwith taxpayers.

Additional Double

Tax Treaties being

negotiated


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PricewaterhouseCoopers Ghana Budget Highlights: Value Added Tax 15

Direct Taxation

Value Added Tax

Possible administrative burden for businesses due to the

introduction of VAT Clearance Certificates

Overview

Overall, there were no major changesto VAT; although certain incentiveswere introduced to encourage thepharmaceutical industry. The keychanges are summarised below:

VAT Clearance Certificate

In order to assist the VAT Service in

achieving its target of 100%compliance, VAT clearancecertificates (VCC) will be issued tobusinesses in good standing. Thesecertificates will be issued uponapplication from the first quarter of2007. The VCC will have a six-monthvalidity period and will be necessaryfor competitive tendering and clearinggoods from the ports, for example.

The introduction of the VAT

clearance certificate may increasethe administrative burden oftaxpayers and may, for example,prolong the process of clearing goodsfrom the ports. The VAT Servicesefforts to eliminate red-tape in theVAT process may suffer a set-backas a result of the introduction of theVCC.

VAT Exemptions toPharmaceutical Industry

In order to encourage localpharmaceutical industries to increaseproduction of locally manufactured

drugs, VAT is to be eliminated on rawmaterials and packaging materialsused in the manufacturing of drugsfor the treatment of HIV/AIDS,malaria and tuberculosis.

All other locally producedpharmaceutical products will be zero-rated.

This measure is expected to makelocally produced pharmaceuticals for

these selected illnesses competitiveagainst their imported substitutes.

It is hoped that, no problems will arisefrom what are and what are not rawmaterials used in the drugs referredto.

With regards to the drugs associatedwith HIV/AIDS, malaria, andtuberculosis, the manufacturerswould be more pleased to see these

as zero-stated opposed to exempt asthis would allow them to claim inputcredits.

Standard VAT Rate

This year is to see theimplementation of the flat ratescheme of 3%. This initiative istargeted at the informal sector andthe rate would be applied to thetaxable persons without recourse to

input VAT claims.


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VAT Clearance

Certificate introduced

3% flat rate scheme

for the informal sector

VAT exemptions oncertain

pharmaceutical rawmaterials


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PricewaterhouseCoopers Ghana Budget Highlights: Customs & Excise 16

Direct Taxation

Customs & Excise

Some changes geared towards enhancing efficiency andeffectiveness

Reduction in Concessionary

Import Duty Rate

The Minister has proposed areduction in the concessionary importduty rate from 10% to 5% for rawmaterials covered under this regime.

This is a step in the right direction asit will encourage local manufacturersto increase production and give thema balanced platform to competeagainst their foreign counterparts.

Introduction of ComputerisedInitiatives

The Customs Excise and PreventiveService (CEPS) aims to introduce thefollowing:

Electronic transactions pricedatabase;

Verification of customs clearancestatus of vehicles;

Provision of vehicle database;and

Electronic transmission ofpermits, licences and otherauthorisation to CEPS via GcNet.

These measures are intended tofacilitate the clearing of goods and

reduce or eliminate fraudulentpractices.

Any move towards enhancedcomputerisation should becommended.

Levy on Timber Exports

The levy on timber exports is to bereviewed during 2007. However, theexisting rate of 3% will remain in usefor now.

No Import Duties on SelectedPharmaceuticals

In a bid to encourage localpharmaceutical manufacturers,import duties will be eliminated onraw materials and packagingmaterials used in the manufacture ofHIV/AIDS, malaria and tuberculosisdrugs.

Rationalisation of Excise Taxes

During 2007, a comprehensive billwill be prepared to convert excise taxon alcoholic drinks, malt drinks,carbonated soft drinks, cigarettes andother tobacco products from thecurrent ad valorem regime to aspecific rate structure. Details ofimplementation will be finalised bythe end of March 2007.


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Levy on timber

exports to be

reviewed during 2007

Elimination of import

duties on selected

pharmaceuticals

Continuedcomputerisation of

CEPS

Excise taxes to be

revised from current

ad valorem regime to

specific rate structure


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PricewaterhouseCoopers Ghana Budget Highlights: Customs & Excise 17

Customs & Excise

This will have a general effect ofreducing excise taxes on beer, stoutand carbonated soft drinks. Excisetax on cigarettes will also be reduced;however, taxes on spirits will beincreased.

Importation of Used MotorVehicles

There will be changes to the mode ofdepreciation of used vehicles forvaluation purposes and a review of

the relevant policy during 2007. Thiswill be aimed at discouraging theimportation of over aged vehicles.

Policy on

importation of

used motor

vehicles to be

reviewed in

order todiscourage

importation of

over aged

vehicles


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PricewaterhouseCoopers Ghana Budget Highlights: Sectoral Outlook 18

Customs &Excise

Sectoral Outlook

Sectoral Performance and outlook for 2007

Introduction

The Ministries, Departments andAgencies (MDAs) continue to follow

the development agenda outlined inthe GPRS II.

Thus selected policies, programmesand activities of MDAs have beengeared towards addressing structuralconstraints from the previous year toincrease productivity, adopt newtechnologies and further enhance thecompetitiveness of the private sectorin relation to the agriculture, industryand service sectors.

The focus of MDAs in 2007 willtherefore be on:

Infrastructure development(especially in energy, roads,telecommunication, water supplyand housing);

Implementation of right incentiveframework for public sector

employees; and

Effective decentralisation forenhanced service delivery.

Private Sector Development (PSD)

In furtherance of the governmentsstrategy to make the private sectorthe key vehicle for acceleratedgrowth and development, policies willcontinue to focus on the following:

development of the ruraleconomy through themodernisation of agriculture led

by a vibrant and competitiveprivate sector;

enhanced infrastructuredevelopment; and

sustained environmentalprotection through re-afforestation.

Agricultural Sector

With the agriculture sector being thechampion for accelerated growth, theMOFA will focus on the followingpolicies and programmes:

Promoting selective cropdevelopment;

Modernising livestockdevelopment;

Improving access to mechanisedagriculture;

Accelerating the provision ofirrigation infrastructure;

Increasing access to extensionservices; and

Enhancing access to credit and

inputs for agriculture.


*connectedthinking

Developmentagenda of the

government still

based on direction

of GPRS II

Three thematic

areas identified

under GPRS II

Strengthening the

capacity of the

private sector as

the engine of

growth

11 key MDAs to

lead in drive

towards

achievement of

competitive private

sector.


19/25


Sectoral Outlook

Agricultural Financing

Credit will be disbursed to farmergroups for production, storage,processing and marketing.

The Food Crop Development Project(FCDP) will make credit available to1,500 eligible farmers.

Cocoa Industry

In the 2006/07 Crop Seasoncocoa output is projected at600,000 metric tonnes;

Producer Price of 9,150,000 permetric tonne is set for the2006/07 cocoa season. The newprice for a bag of 64 kg is now571,875 as against a previousprice of 562,500; and

Government has supportedGhana COCOBOD to secure apre-export trade finance facility ofUS$810 million from externalfinancial institutions. The facility,allows COCOBOD to withdraw an

additional US$70 million tofinance the 2007 Light Croppurchases.

Lands Sector

Activities of the Land AdministrationProject will be strengthened.Activities will include:

The drafting of new legislation for

land administration and institutionalreform will be completed and laidbefore parliament;

The coming in force of a new

legislation for land administration

should help to address the problem of

land dispute in the country, and

promote investor confidence in

acquiring and developing lands for

business activities;

The inventory of state lands willcontinue in the 3 northernregions;

Computerisation of the existingland sector agencies willcontinue;

Human resource capacitydevelopment will be undertakento train the staff of the land sectoragencies; and

Collaboration will take place withthe Millennium DevelopmentAuthority to establish land titleregistration services.

The Land Valuation Board (LVB), inpartnership with Private SectorValuers, will carry out the revaluation

of properties within the AccraMetropolitan Assembly area.

Forestry Sector

The Ministry of Lands, Forestry andMines (MLFM) will undertake thefollowing:

260 timber leases will beconverted to Timber Utilisation

Contracts. Conversions areexpected to increase revenuegeneration; and

Wildlife institutional capacity willbe built to enhance managementof competitive and transparentinternational tendering in respectof the commercialisation ofwildlife related infrastructure.

Mines Sector

The MLFM will continue to regulatethe use and handling of explosivesthrough the issuance of permits anddirecting the manner in whichexplosives should be stored anddisposed of.

The MLFM will continue withexploration and geological mappingof targeted areas to generategeological information for appropriate

policy decision making and fordissemination to the general public,especially investors.

.

The government

has put in place

measures to boost

the cocoa industry

The MLFM will

initiate key policy

measures to

improve forestry and

wildlife contributionto national wealth


20/25


Sectoral Outlook

The MLFM will continue to assistsmall scale mining cooperatives.

Energy Sector

A number of initiatives will be enactedto address the energy sectorchallenges and to ensure continuoussupply of reliable energy:

The medium term strategic goalfor the Power Sub-sector is torestore the power generatingcapacity of the country and alsoto upgrade the infrastructure inorder to improve the reliability ofpower supply; and

The Volta River Authority (VRA),in collaboration with the Ministryof Energy (MOE) has concludedarrangements to procure an 80MW power plant which will beoperational by April 2007.

Under the Self Help ElectrificationProject (SHEP)-4 Programme, over200 communities will be connected tothe national grid in 2007.

The full unbundling of VRA will becompleted in 2007 with theestablishment of a separateElectricity Transmission Utility (ETU).

The MOE will continue to promoteand install solar powered systems inselected institutional facilities underthe Ghana/Spanish Loan protocol.

The MOE will initiate practicalregulatory measures to speed updevelopment of renewable energytechnologies, particularly wind, solarand waste-to-power.

Petroleum Sector

The medium term strategic goal is tofully implement the liberalisation ofthe downstream sector, speed upprivate sector investment and

manage the impact of rising crude oiland petroleum product prices on thenational economy. Within the contextof the liberalisation, the private sector

will be allowed to import crude oil forrefining.

Much as the liberalisation of thedownward stream sector would in nodoubt help in the development of theeconomy there should be controlmeasures to prevent the adulterationof fuel in the refinery process.

The government will continue toencourage investment in the searchfor Ghanas hydrocarbon resources.The search in deep waters will beboosted and exploration in the VoltainBasin is expected to commence in2007.

To facilitate the development ofrenewable energy resources, aRenewable Energy Law will beenacted to provide the legalframework for accelerating thedevelopment of renewable energy inthe country.

Ministry of Trade, Industry, PSDand Presidential Special Initiative(MOTI, PSD & PSI)

The MOTI policy direction for 2007will be to develop a vibrant,technology-driven, competitiveindustrial sector that significantlycontributes to economic growth andemployment creation. This willinvolve mass mobilisation of the ruralcommunities and other vulnerablegroups, including women.

The MOTI will facilitate theestablishment of a cold chain facilityfrom the farm gate to export marketcentres as well as reducing clearancetime.

The National Industrial Policy, whichwill focus on strategic sectors to drivethe continuing industrialisationprocess, will be completed.

Tourism

To accelerate community-basedtourism and integrated development,the Ministry of Tourism and DiasporanRelations (MOTDR) intends

The energy sector

challenges

Liberalisation of the

Petroleum Sector to

speed up private

sector investment.

Establishment of

cold chain facility

from farm gate to

market centres


21/25


Sectoral Outlook

organising five major internationalfairs and exhibitions to promoteGhana as a tourism destination:

A week long Paragliding Festivalto boost both domestic andinternational tourism at Atibieduring the Easter celebration;

Emancipation and Panafestcelebrations scheduled from 21July 2007 to 5 August 2007;

Launch of the Akwaaba -Anyemi programmes, dubbedthe Joseph Project, aimed atattracting Ghanaians back to

Ghana;

National Chocolate Day tocoincide with Valentines Day on14 February; and

Tours to Tetteh Quarshie CocoaFarm at Mampong and othercocoa growing areas.

ICT Sector

To create an effective ICTenvironment, the Ministry ofCommunication will submit four bills,the Electronic Transaction Bill, theTelecommunications Bill, the NationalCommunications Authority (NCA) Billand the National InformationTechnology Agency Bill throughCabinet to Parliament for approval in2007.

Educational Sector

Basic Education

The drive towards the attainment ofUniversal Primary Completion by2015 and Gender Parity by 2008 willbe given additional impetus.

The Capitation Grant Scheme toincrease access to basic educationwill be sustained and government willalso continue to subsidise theexamination fees of the BECE.

Sports

In 2007, various preparatory activitiesincluding work on construction ofSekondi and Tamale stadia as wellas the rehabilitation of the Ohene

Djan Stadium, Accra El WakStadium, Accra and Baba YaraStadium, Kumasi will be completed.In addition, 20 community parks willalso be upgraded.

Preparations towards the CAN 2008will certainly result in thedevelopment of sports facilities in linewith international standards. This isexpected to market Ghana to theworld during the CAN 2008 sporting

events.

Health Sector

In 2007 the health sector will beginthe implementation of the new healthpolicy focusing on achieving threeinter-related and mutually reinforcingobjectives:

Ensuring that children survive

and grow to become healthy andproductive adults that reproducewithout risk of injuries or death;

Reducing the excess risk andburden of morbidity, disability,and mortality, especially in thepoor and marginalized groups;and

Reducing inequalities in accessto health, population and nutrition

services.

National Health Insurance Scheme

The Ministry of Health (MOH)together with its collaborativeagencies will sustain the NHIS andexpand its coverage nationwide toabout 55 per cent of the population.

Divestiture Implementation

Committee (DIC)

In 2007, the DIC will continue tofocus on off-loading government

Development of

sports facilities to

meet internationalstandards

Four new ICT bills to

be presented to

parliament.


22/25


Sectoral Outlook

shares in existing companies throughthe Ghana Stock Exchange. This willensure public participation in theownership of divested State OwnedEnterprises (SOEs) and improverevenue flow to the government.

The continued divestment of SOEssupports governments assertion thatthe private sector is the engine ofgrowth. This exercise is expected torevamp very important businessesthat have gone down, and also createmore employment opportunities.

The Ghana Investment PromotionCentre (GIPC)

GIPC will continue to create andfacilitate the atmosphere for domesticand foreign investment in varioussectors of the economy (with theexception of mining and petroleum).

In 2007, the GIPC will continue toimplement its corporate plan inconjunction with relevant governmentagencies whose activities have adirect bearing on GIPC. Key areas ofimplementation will be to improve the

enabling environment, investorfacilitation and servicing, investorpromotion and generation, review ofthe restructured one-stop-shop forimpact and institutional development.

In this golden age of business, thereis the need to make the GIPCs one-stop-shop concept a reality. This willfacilitate doing business in Ghanaand thus project the country as thepreferred investor destination.

Micro-financing and small loans

Government continues to pursue itspolicy of supporting the developmentand growth of a sustainable microfinancing system under GPRS II as ameans of reaching the productivepoor of society with credit and otherfinancial services. Some steps havebeen taken to strengthen the microcredit and small loans scheme.

It is expected in 2007 that 110,000micro and 22,000 small scale

borrowers will be assisted withcredits.

Public Procurement Board

The board will undertake thefollowing activities:

Assessment of 200 entities todetermine their level ofcompliance with the PublicProcurement Act;

Development and organisation oftraining for 500 procuremententities;

Implementation of the Web-based procurement planningsoftware;

Completion of the development ofsoftware for procurementplanning, recording andmanagement, and roll out to allMDAs and MMDAs; and

Further consultations with

stakeholders on the DomesticContent Bill which offersincentives to firms operating inGhana to use a specificpercentage of their inputs fromdomestic sources.

Non-Tax Revenue Mobilisation

To improve non-tax revenuecollection, the Ministry of Finance andEconomic Planning (MOFEP) willimplement the following measures:

Work with Bank of Ghana andCommercial Banks to introduceon-site banking, and wherepossible to facilitate the collectionof non-tax revenue and internallygenerated funds (IGFs) at MDApremises;

Work with the IAA to carry out

auditing of (IGFs) of selectedMDAs and MMDAs and DistrictAssemblies in order to strengthentheir collection mechanisms,

Private sector

enterprises remain

imperative to

national

development, selfdependency and

poverty reduction.

Investment drive for

accelerated

development and

ob creation


23/25


Sectoral Outlook

improve internal controls andreduce revenue leakages;

Collaborate with the Ministry ofLocal Government and RuralDevelopment to implementagreed measures to improve thecapacity of MMDAs to generaterevenue; and

Facilitate the review of obsoleteand unrealistic fees and chargesby MDAs.

Internal Revenue Service (IRS)

The IRS will undertake the following

activities:

Establish 5 per cent withholdingtax monitoring units to draw dealwith non-compliant taxpayers tohelp maximize collection;

Intensify tax education,enforcement and audit;

Re-launch the tax stamp and

establish the Small TaxpayersBureau to administer the rent taxand tax stamps; and

Commence full computerisationof its operations.

Customs Excise and PreventiveService

CEPS will undertake the following

activities:

Enhance the performance ofpersonnel through CapacityBuilding programmes;

Commence electronictransmission of permits, licensesand other authorization to CEPS(GCMS) via GCNet;

The GCNet Unit in the ResearchDivision will be made fullyoperational to capture taxpayers

who prepare fictitious accounts;and

As part of CEPS programme todeepen automation of theprocesses and procedures, allMDAs whose license, permit orany other form of authorization orapproval (including those forexemptions) is required in theimport/export trade, shall berequired to be connected to theGCNet not later than 1 April2007.

This measure will not only facilitateclearance of goods but also eliminatefraudulent practices by both traders

and officials in the procurement andutilization of such facilities.

VAT

Registration and Enforcement

Physical surveillance of VATregistered businesses will be steppedup to complement the invoiceinvigilation and improve compliance.

Use of Cash Registers

In 2003 VAT and import duty on cashregisters were removed to enablesmall and medium size enterprises(SMEs) dealing in high volume lowvalue goods acquire them. Theobjective was to improve their recordkeeping and financial managementcapabilities. In year 2007 the VATService will capitalise on this initiative

by further enhancing existing retailschemes and own-invoicedispensations to ensure that fulladvantage is taken of the controlmechanisms inherent in thesetechnologies to boost compliance bySMEs with the requirements of theVAT law and thereby enhance VATrevenue.

Ministry of Public Sector Reform

The Ministry of Public Sector Reformwill continue its activities in closecollaboration with implementing

Internal Revenue

Service (IRS) to

run a database of

its operations.

VAT services to

enhance the use

of Cash Registers


24/25


Sectoral Outlook

agencies to achieve the followinggoals:

Records Managementimprovement;

Public Sector Pay and PensionReform; and

Facilitate and of the deploymentof ICT infrastructure and skillswithin the Civil Service in order toensure the efficient execution ofgovernment programmes.

In particular the Ministry will:

Implement the new salarystructure for all public sectorworkers;

Establish a National Commissionon salary administration;

Restructure the public serviceincluding the establishment ofcompetitive recruitment, selectionand training; and

Establish performance basedadministration.

Ministry of Justice

The Ministry of Justice will continuewith the following activities in 2007:

Continue with the implementation

of business registration andlicensing reform strategy tominimise the number of days forregistering business from 14 to 5days. To make the registration ofbusinesses more accessible, theRegistrar Generals Departmentwill open regional offices inKumasi and Tamale.

The effective implementation ofbusiness registration and licensingreform strategy will certainly resolvethe delays in business registrationand encourage more investors to dobusiness in Ghana.

The revision of the CompaniesCode, which has been on-goingmay be completed by the secondquarter of 2007.

The revision of the Companies Codeis expected to make the provisionstherein clearer to the businesscommunity. The revision is alsoexpected to bring the Code in linewith current business law practices.

Ministry of Interior

Activities to be undertaken by theMinistry of Interior in 2007 willinclude:

Formulate policies on Migrationand Work Permits; and

Computerise the immigrationprocedure.

Public Sector

Reform continues

unabated

Immigration

procedures to be

computerised

Business

registration to be

enhanced to

attract investors


25/25

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2007 ghana budget highlights

Documents