Spotlight on Ghana – Economic Outlook and Tax Developments

Spotlight on Ghana – What’s going on

Once lauded as a “beacon of hope and democracy on the African Continent”, Ghana has long been seen as the civilised, urbane cousin to its noisier neighbour Nigeria, with many multinationals preferring to use Ghana as their West African hub.

Today we dig into some significant tax changes, with more changes announced for 2023.

Ghana, like all African countries, has been disproportionately impacted by the Covid crisis.  In 2022, GDP growth took a downward trajectory from the projected 5,8% to an actual 3,5% at September 2022. Inflation has also risen sharply from a projected end-of-year rate of 8% to an actual whopping 37,2% at September 2022. The Ghanaian currency has also seen a rapid depreciation against the United States Dollar (USD) of about 53,8% in 2022. Over the past few months, Ghana’s debt sustainability has also been called into question following a downgrading by sovereign credit rating agencies such as Moody’s, S&P Global, and Fitch Rating.

2022 Tax Measures 

With this background, 2022 ushered in a number of tax measures. Awakening much public debate has been the passing of the controversial Electronic Transfer Levy (E-levy) which imposed a headline rate of 1,5% on the electronic transfer of funds. Road tolls were also abolished due to the government’s high hopes that the e-levy would yield the needed revenue. However, the expected revenue target from the e-levy was missed as Ghanaians kicked against it vehemently, much as we saw with the e-tolls rebellion in South Africa a few years back.

Other key tax measures in 2022 included a revision of personal income tax bands and rates; the amendment of withholding tax rates on payments for unprocessed minerals from 3% to 1,5%; the revision of the threshold for presumptive tax; the extension of Covid-19 concessions; the extension of zero VAT rating on locally manufactured textiles for two years; the extension of interest and penalty waivers on the principal amount of tax owed and the continuation of the policy on benchmark value discounts on a selected list of imported items.

On the VAT front, the VAT threshold was also reviewed and revised leading to a re-categorisation of businesses from one dispensation of VAT (i.e the flat rate scheme) to another (i.e the standard rate scheme). All retailers making an annual revenue of more than GHs 500 000 and all wholesalers were thus migrated from the VAT flat rate scheme with VAT of 3% to the standard rate scheme with VAT of 12,5%, with significant concomitant compliance costs.

The Ghana Revenue Authority has also made strides in enhancing its electronic tax filing and payment system. Recent improvements have been the electronic tax clearance system, the electronic VAT filing and declaration system for non-residents who source revenue from Ghana as well as the piloting of the electronic VAT invoicing system.  Further and significant tax changes are also expected in 2023, so watch this space.

Tax audits remain on the rise, as elsewhere across the continent, and the Ghana Revenue Authority (GRA) continues to strengthen staff capacity in the areas of transfer pricing compliance and general tax audits.