2007 Budget Highlights*

*connectedthinking

The 2007 Budget

Overall Summary
Statement and
Economic Policy
2007 Budget: “The Golden Jubilee Budget” but is it golden for the
was delivered to taxpayer?
Parliament on
Thursday, 16
November 2006 “Focus will be on growth within an The government has indicated its
by Hon. Kwadwo environment of economic stability” commitment to Ghana’s obligations
Baah-Wiredu, under the extended West Africa
M.P. and Minister Monetary Zone Programme (WAMZ)
of Finance and The Economy
and as such it will support the quoting
Economic and trading of national currencies
Planning
For the second time in Ghana, the across the WAMZ. The government is
Budget was read before the beginning also encouraging commercial banks in
We outline in this
of the new fiscal year. the country to engage in the trading of
publication the
principal matters these currencies.
covered by the
The focus of the 2007 Budget is on the
Honourable
following: The government has expressed
Minister in his
address commitment to the efforts of the
Economic Community of West African
 Private Sector Development States (ECOWAS) in having a
In this Issue:
common external tariff for the region
 Overall  Human Resource Development by the end of 2007 but it plans to
Summary protect agricultural and industrial
sectors against strong competition
 The Economy  Good Governance and Civic from imports, in the form of higher
 Direct
Responsibility tariffs, with the introduction of the
Taxation ECOWAS Common External Tariff
(CET).
2006 Performance
 Value Added
Tax Actual The government’s macroeconomic
(projected)
 Customs & Target
to end of policies, strategies and targets for
Excise 2006 2007 are in line with the
Real GDP macroeconomic framework outlined in
 Sectoral growth
6.0% 6.2%
the Growth and Poverty Reduction
Outlook Strategy II (GPRS II).
12-month 10.5%
7%-9%
CPI inflation (October)
We would point
Gross
out that changes international
4 Months 3.6 Months 2007 Fiscal Year Projections:
have been made imports imports
reserves
in prior years to
Domestic
the proposals primary
1.4% of 2.1% of  GDP growth of at least 6.5%;
made in the GDP GDP
deficit
Budget Statement
before the
Overall
2.1% of 4.9% of  Single digit end of period inflation
budget
relevant bills have GDP GDP between 7% and 9%;
deficit
been published
Domestic
and enacted Debt-GDP 8.7% 10.1%
ratio  Average inflation of 8.8%;

PricewaterhouseCoopers Ghana Budget Highlights: Overall Summary

Overall Summary
to the rate of 8%, while that
 Accumulation of international applicable to management and
reserves to at least three technical fees will be reduced to
months of import cover; 15%.

 Domestic primary deficit of During 2007, government plans to

0.6% of GDP; and develop and implement a system
that will enable the government to
assess and collect income tax using
 An overall budget deficit of
the value of vehicles registered.
3.2% of GDP.

Direct Taxation The government remains focussed

on entering into double tax treaties to
To encourage land title registration eliminate double taxation on incomes
and investments, a one year earned in Ghana.
interest waiver amnesty has been
introduced on rent owed to the
government. Capital gains tax is to be reduced to
the rate of 5%.
In addition, land title registration
fees will no longer be based on the Value Added Tax (VAT)
value of the land but rather at flat
rates. In addition to the existing
requirement to obtain an income tax
clearance certificate (TCC), taxable
Various tax reliefs for individuals persons will now be required to
have been increased. obtain a VAT clearance certificate to
tender for contracts and to clear
goods from the ports.
The taxation of accommodation and
vehicle benefits in kind has been
revised. This revision will decrease VAT on packaging materials used in
the taxable benefit for the production of drugs for the
accommodation but in most cases treatment of HIV/AIDS, tuberculosis
increase the taxable benefit on and malaria will be removed.
vehicles to employees.
All pharmaceutical products will be
A Tax Arbitration Board is to be zero rated.
established to spur transparency in
tax administration and expedite
resolution of appeals. Customs and Excise

To rationalise the indirect tax

The National Reconstruction Levy regime and bring it in line with
(NRL) is completely abolished with international trends, excise duties
effect from 1 January, 2007. are generally no longer to be
calculated on an ad valorem basis.
Tax incentives including 10-year tax Excise duties on beer, stout,
holidays, exemptions from dividend branded spirits, wines, malt drinks,
and capital gains tax have been carbonated soft drinks, cigarettes
announced for venture capital and other tobacco products will be
finance companies. taxed at specific duty rates.

Government intends to review the

All persons who invest in venture current import duty exemption
capital finance companies will have regime to eliminate abuse and to
their investments deductible for tax target the productive sectors of the
purposes. economy.

The withholding tax rates on

dividends and rent will be reduced

PricewaterhouseCoopers Ghana Budget Highlights: Overall Summary 2

Overall Summary
The concessionary rate on raw intends to continue its participation
material imports has been reduced in major international fairs and will
to 5%. embark on a strategy of promoting
domestic tourism within the country.
Sectoral Outlook
Road Infrastructure

Agriculture
The key milestone for the country is
to become a transport hub for West
Ministry of Food and Agriculture Africa. To achieve this, the
(MOFA) will focus on the policies government will be pursuing a
and programmes aimed at
number of measures during the
enhancing agricultural output in
2007 financial year. Key among
order to achieve poverty reduction
these is continuing with the
as well as food security in the
maintenance and completion of on-
country. going projects as well as initiating
new development projects. These
To ensure the welfare of cocoa developments will largely be
farmers, the government has financed with the support of the
resolved to pay a bonus for cocoa nation’s development partners.
purchases for the 2005/06 main
crop season.
To raise additional revenue for road
maintenance, the government has
The government is also to promote proposed an increase in the fuel
the use of local rice and poultry by levy of US$0.02 as well as
all public institutions. increases in other road user fees
and levies.
Energy
In a bid to enhance transport
management, the government will
In response to the increasing
be developing strategies to
demand for energy in the country,
systemise annual registration of
the government will restore and
vehicles in the country.
upgrade various energy generating
facilities. The government, in
collaboration with its development Information Communication Technology
partners, will initiate new energy (ICT)
generation projects around the
country. During 2006 the telecommunication
industry experienced significant
The Petroleum Exploration law is growth marked by increased
expected to be reviewed in order to subscriber numbers.
make Ghana an attractive
destination for investments in hydro The government will focus on
carbon exploration. developing the legal and regulatory
framework for the sector. In
The government has also reiterated addition, it will adopt ICT in its
its commitment to fully implement operations in order to promote
the liberalisation of the downstream accountability, transparency and
sector. In the context of the efficiency in its service delivery.
liberalisation, the private sector will
be allowed to import crude oil for Health
refining.
The National Health Insurance Fund
Tourism (NHIF) experienced a growth in its
registered members in 2006 and the
As part of promoting Ghana as a target is to continue expanding the
tourist destination, the government coverage in 2007. The government
will also continue to intensify its

PricewaterhouseCoopers Ghana Budget Highlights: Overall Summary 3

Overall Summary
efforts at improving access to and establish the Fair Wages
quality and affordable health Commission which will be tasked
services to all Ghanaians. To with the responsibility of
achieve this, the sector ministry and administering the new
allied agencies are expected to comprehensive pay structure.
implement programmes that will
involve capital investments in the
New National Passports
health sector, capacity development
through personnel training,
promotion of healthy lifestyles, and New passports with enhanced
an increase in funding for the fight security features that meet the
against HIV/AIDS, malaria and required international standards are
guinea worm among other common to be introduced. Additionally,
diseases. electronic visa processing systems
are to be introduced at the various
Good Governance consulates.

The focus of the good governance Ghana Investment Corporation

strategy under the GPRS II is to
empower state and non-state The government is to establish the
entities to participate in the Ghana Investment Corporation
development process, as well as to which will encourage private sector
promote peace and stability in the participation in the financing of
country. To achieve this objective, infrastructure projects that will have
the government will continue to economic returns. This entity is
promote effective, responsible, earmarked to acquire shares in
transparent and accountable state international and multinational
machinery. The government will companies that purchase raw
also strive to create an enabling materials from Ghana for
environment for the private sector processing.
and continue to support efforts to
accelerate growth and reduce
poverty. Human Capital Development

Diversifying Sources of Funding Members of parliament are to be

allocated ¢51.75 billion from the
Heavily Indebted Poor Countries
Based on Ghana’s B+ sovereign (HIPC) Funds for human
rating, the government intends to development programs in their
enter the international capital constituencies.
market as a sovereign borrower to
diversify and broaden its funding
options whilst requesting access to
the International Bank of
Reconstruction and Development
(IBRD) arm of the World Bank.

Towards a Fair Wage

The government has indicated its

commitment to undertake a holistic
public sector wage reform which
aims to achieve competitiveness
between public sector incomes and
those of the private sector. The
comprehensive pay reform is
expected to be phased in over a
three-year period. The new salary
scheme will replace the Ghana
Universal Salary Structure (GUSS)

PricewaterhouseCoopers Ghana Budget Highlights: Overall Summary 4

 Overall Summary

2007 Budget Highlights*

*connectedthinking

The Economy
“Golden Jubilee Budget”
“Focusing on growth
within an environment of
“Focusing on growth within an environment of economic
stability for economic
stability towards economic renaissance”
renaissance”
The Economy in 2006  Real GDP growth of 6.2% is
projected, ahead of the target of
6%. The agriculture sector
Based on the significant
contributed 35.8% of GDP, the
improvement in the socio-economic
industrial sector 25.4% and the
landscape over the past six years,
service sector 30.1%;
the government is confident that it is
on schedule to achieve “Middle
Income Status by 2015” target. This  End year-on-year inflation as
confidence is further buoyed by the measured by changes in CPI
improvement in the country’s was reported at 10.5%.
Year end inflation is international ratings. Inflation is expected to end the
expected to be 11.2% year at 11.2%;
The growth in the domestic
economy in 2006 corresponds with  The average inflation rate is
growth in the world economy. projected to end the year at
11.8%;
In spite of challenges posed to most
economies by high crude oil prices,  Gross international reserves are
consumer spending and projected to fall from 4 months
government infrastructure financing import cover (2005) to 3.6
Driving national
continued to spur on economies to months;
development through positive growth. Economies such
Private Sector as, the USA, Japan, China and the
Development Euro Zone contributed significantly  The domestic primary deficit
Human Resource to this growth. Low income was reported to be 2.1% of
Development and countries also rode on the back of GDP (end of September 2006),
buoyant prices on the commodities compared to a target of 1.4%;
Good governance and
(oil and metals, especially gold)
Civic Responsibility.
markets to record reasonable
 The overall budget balance was
growth rates.
in deficit at 4.9% of GDP
Overall budget balance compared to the year’s target of
in deficit of 4.9% Ghana, in spite of the slower growth 4.5% of GDP;
compared to a targeted projected for Sub-Saharan Africa, is
likely to achieve its key macro-
4.5% of GDP.  The average commercial
economic targets for 2006:
lending rates generally
decreased, underpinned by a

PricewaterhouseCoopers Ghana Budget Highlights: The Economy 5

 The Economy

stable Bank of Ghana (BoG) This resulted in the inflation rate

policy rate. The BoG prime rate generally declining over the first
was dropped 100 basis points three quarters of 2006.
in January 2006 and has since
been maintained at that level;
The year-on-year growth rate of
and
reserve money at the end of
September as compared to the
 As at September 2006, the cedi same period in 2005 reduced from
had remained relatively stable 19.3% to 16.7%.
against foreign currencies; it
depreciated by 9.5% against
Fluctuations in the interest rate
the British Pound, 7.8% against
were quite low. The BoG cut the
the Euro and a moderate 0.9%
prime rate by 100 basis points at
against the US Dollar.
the start of the year and money
market rates declined during most
Total receipts at of the year. However, Deposit
Fiscal Performance
December 2006 are Money Banks (DMBs) did not
expected to be change their lending rates
covered by total
The overall budget balance out turn significantly over the review period.
was a 4.9% deficit of GDP
payments of ¢41.4
compared to a 3.8% deficit in 2005.
trillion. The domestic primary balance Credit growth has been strong to
worsened, being at 2.1% deficit of date at 31.7%. Outstanding credit
GDP compared to a 0.7% surplus of (in real terms) increased by 17.4%,
GDP in 2005. with a greater proportion of this
growth channelled to the private
Despite the significant sector of which the services sub-
Total receipts at the end of sector was the largest beneficiary.
lowering of the Bank of September 2006 outperformed the Credit to GDP ratio was 20.9% as
Ghana’s prime rate, results for the 2005 corresponding against 18.6% for the same period
Deposit Money Banks period, helped partly by ¢1,826.4 in 2005. As at the end of
did not reciprocate by billion Multilateral Debt Relief September 2006, the private sector
significantly lowering
Initiative (MDRI). Provisional share of credit was 81.6% as
figures for total payments recorded against 77.4% for the same period
their lending rates.
an increase for the first nine months in 2005.
of 35% over the previous year’s
corresponding period.
Depreciation of the cedi against the
World commodity country’s major trading partners
By the end of December 2006, total was well managed.
prices and debt relief receipts are projected to be
under MDRI determine ¢41,357.1 billion of which domestic
the overall favourable revenue is expected to be Balance of Payments (BOP)
balance of payments ¢25,421.5 billion with the other Outlook for 2006
projections. significant revenues from grants
(¢7,228.6 billion) and loans
The overall balance of payments is
(¢5,759.3 billion).
projected to be a surplus of
US$178.8 million by the end of the
The total payments for 2006 are year as compared to the surplus of
General progress projected at ¢41,357.2 billion. This US$84.34 million in 2005. This
made towards is made up of statutory payments of healthy surplus expectation is
¢13,006.5 billion and discretionary fuelled by anticipation of higher
achieving
payments of ¢28,350.7 billion, both export receipts resulting from strong
convergence criteria. of which represent slight savings in commodity prices, and debt relief
Appreciably, three out original annual budget estimates. under the MDRI.
of five WAMZ
countries achieved
Monetary Policy Developments in the West Africa
single digit inflation in Monetary Zone (WAMZ)
June 2006.
The policy implemented by the BoG
was targeted at inflation The countries in the WAMZ
management in the face of rising generally made progress towards
crude oil prices on the world market. achieving the convergence criteria

PricewaterhouseCoopers Ghana Budget Highlights: The Economy 6

 The Economy

targets. The macroeconomic Medical doctors, nurses,

environment was generally good in polytechnic teachers, members of
the first part of 2006; modest growth the Teachers and Education
was recorded in all countries, with Workers Union (TEWU), and
reduced inflation and improved graduate teachers (NAGRAT)
external positions. Three out of the engaged the government at various
five WAMZ countries (Gambia, times over the perceived
Guinea and Nigeria) achieved inadequate salary levels.
single digit inflation in June 2006.
Overview of Macroeconomic
Major Socio-economic Framework for 2007
Developments in 2006
GPRS II will continue to provide the
The Electricity Power Sub-Sector guiding framework for 2007. Key
Crisis macro-economic targets set out in
the 2007 budget include:
Electricity sub-sector crisis
during the year has Ghana suffered a serious setback in
caused government to its electricity sub-sector. Low water  Real GDP growth of at least
reconsider its energy levels in the Akosombo Dam and 6.5%;
high petroleum product prices
reference strategy to
forced an extensive country-wide
accommodate a much
load management programme, as  End of year inflation of between
wider medium-to-long term the VRA was unable to generate 7% and 9%;
initiatives adequate electricity for industrial
and domestic use.  Average inflation rate of 8.8%;

With some improvement in rainfall  Accumulation of international

patterns, it is likely that water in the reserves to a target of at least 3
Akosombo Dam will rise to 247 ft by months of import cover;
the end of 2006. However, the
expected 247 feet level, which falls
In the short-term within the period of the dry season,  Domestic primary deficit of
is critically low compared with the 0.6% of GDP; and
government must however
mid-point operating level of 259
steer the course of
feet. This level will require VRA to
delivering non- continue to manage electricity  An overall budget deficit of
hydroelectric power supply from its Akosombo plant, at 3.2% of GDP.
generation of about 500 least into the first half of 2007.
megawatts to complement To achieve the above targets, the
the current inadequate This situation has caused following policies will be applied:
generation capacities. Government to reconsider its
energy reform strategy to address  Prudent fiscal policy
the current crisis and to prevent a management;
recurrence in the medium-to-long
term.
 A monetary policy that is flexible
enough to respond to external
Deadlock on Public Wages and shocks, promote growth and
Salaries ensure price stability;

For the first three quarters of 2006,  Real interest rates that enhance
wages and salaries amounted to effective mobilisation of savings
¢8,422.5 billion, higher than the and make credits affordable to
budgeted amount of ¢7,588 billion. the private sector; and
This is projected to hit ¢10,972.5
billion by the end of 2006, thereby
exceeding the budget of ¢9,999  Relatively stable real exchange
billion. During the year there were a rates that promote international
significant number of labour issues trade.
involving public sector workers.

PricewaterhouseCoopers Ghana Budget Highlights: The Economy 7

 The Economy

Furthermore, structural constraints also programmed to form about

at the policy and institutional levels 29.3% of total discretionary
that impede increased productivity, payments, 40.7% higher than the
adoption of technology and 2006 projected outturn.
competitiveness of the private
The macroeconomic sector with respect to agriculture,
industry and service will be The overall budget deficit is
environment appears expected to be 3.2% of GDP at the
addressed.
stable with GDP growth at end of 2007. The domestic primary
6.5%. However balance is targeted at 0.6% of GDP
international reserves, Resource Mobilisation and the domestic debt-to-GDP ratio
domestic primary surplus is projected to be 7.9%.
and overall budget deficits Total revenue collection for 2007 is
are projected to deteriorate projected at ¢54,315.9 billion, of The drivers for these expectations
over the previous year’s which domestic revenue is are commodity prices and crude oil
targets. projected at ¢37,532.2 billion. The prices – cocoa and gold are both
tax revenue agencies are expected expected to perform strongly on
to collect ¢32,533.1 billion, which is world markets; oil prices are
equivalent to 23.6% of GDP. The expected to remain in excess of
2007 revenue target is 2007 tax revenue projection US$50 per barrel.
40% higher that 2006 represents a growth of 39.5% over
projections. the projected outturn for 2006.
Monetary Policy Outlook

The government plans to derive its

The BoG is expected to continue to
revenues mainly from direct taxes,
Capacities of revenue implement a monetary policy aimed
import taxes, VAT, duties and loans.
at containing inflationary pressure
agencies to be enhanced, To achieve the revenue
performance, it will be necessary to and reducing inflation to a single
however there should be
enhance the capacities of the digit by the end of the year. Broad
better negotiations on money is therefore projected at a
project loans to achieve
revenue agencies to collect the
more restrained rate of 21.4%. A
taxes and develop systems to
best economic cost. more aggressive target of 22.6%
prevent revenue leakages. In
would be pursued for growth in
addition, project loans, which
account for a large portion of reserve money.
government loans, will have to be
well negotiated to achieve best The External Sector and Balance
economic cost. of Payments Outlook

Resource Allocation The government envisages that

external financing requirements will
Total payments are estimated at continue to be high. Merchandise
¢54,315.9 billion, made up of exports are still expected to drive
domestic growth and alleviate
statutory payments of ¢14,818.1
poverty. The country’s oil bill is
Total receipts at December billion and discretionary payments
expected to be US$1,618.2 million.
2007 are expected to of ¢39,497.8 billion.
Merchandise exports are projected
equal total payments at to reach US$4,105.5 million.
¢54.3 trillion. Out of the discretionary payments Together with transfers, the current
personnel emoluments are account is expected to close in
estimated at ¢13,167 billion, deficit at US$619.7 million. An
indicating a 20% increase over the expected net inflow from a mix of
Merchandise exports will projected outturn for 2006 and debt, equity and other investments
representing 33.3% of total will leave, the overall balance of
play a critical role in
discretionary payments for 2007. payments at a surplus of US$198
achieving surplus on the
The level of personnel emoluments million.
balance of payments. But also constitutes 41.5% of total
this would need to be domestic revenue, and 9.6% of
Private Sector Competitiveness
supported by debt, equity nominal GDP.
and investments into the
economy. In line with GPRS II, the private
Total investments (excluding those
sector is considered the key vehicle
financed by statutory funds) are
for accelerated growth and

PricewaterhouseCoopers Ghana Budget Highlights: The Economy 8

 The Economy

development. Government policies These measures include

and programmes will continue to collaboration between the VRA and
focus on the agriculture, industry the mines, the relocation of the
and services sectors to address Osagyefo barge to Tema, and the
structural constraints that impede procurement of a new plant to
increased productivity and generate some 125MW of thermal
competitiveness of the private energy. In the long-term the Bui
sector. Dam is expected to augment
enhanced generating capacity.
Public Sector Salaries and Wages
All the funds for MDRI for 2007
The wage bill appears high have been voted for the energy
A wage bill of ¢13.2 trillion, sector to support the funding of the
taking a significant portion representing 9.6% of GDP and proposed short-term solution to the
of the GDP. Policies and 33.3% of total discretionary
energy crisis. The MDRI total of
initiatives are proposed to expenditure is projected.
¢1,598.65 billion has been allocated
look at the whole public entirely to the VRA to be used to
sector salaries and wages Phase 1 of the implementation of fund the procurement of gas
policy. Any policy the public sector pay reform has turbines and a barge.
initiatives would need to resulted in the removal of distortions
build on any previous in the GUSS. Phase II involving the A Summary of Sectoral Growth
government initiative to assessment of the job content and Prospects
the consequential placement of all
achieve synergies.
public sector employees will be
Emphasis on productivity
completed in 2007. A Fair Wages The agricultural, industrial and
should be key! Commission is to be established to service sectors are expected to
administer a new comprehensive grow at 6.1%, 7.7% and 6.7%,
pay structure. respectively. Highlights of key
programmes driving these growth
rates include:
Multilateral Debt Relief Initiative

 Under the Food Crop

A total of US$4 billion is expected
IMF, WorldBank and the Development Project (FCDP),
as a debt relief package in respect
African Development Bank 1,500 eligible farmers will be
of outstanding obligations to the
to forgive a total of US$4 given credit support totalling
International Monetary Fund (IMF),
billion.
¢5.3 billion (US$584,000);
the World Bank and the African
Development Fund over 50 years.
The objective is to augment the  The Livelihood Empowerment
current level of public investment to against Poverty (LEAP) pilot
accelerate the achievement of the social grants scheme will be
Millennium Development Goals developed in 2007 with support
(MDGs) and GPRS targets. from the HIPC fund;

Millennium Challenge For 2007, with expected inflows  The first phase of the
from MDRI of ¢1,598.65 billion and Millennium Challenge Account
Account (MCA) project
HIPC debt relief of ¢2,210.83 billion, (MCA) project takes off in 2007
takes off in 2007. planned total poverty reduction with estimated expenditure of
expenditure will go up to ¢12,926.83 US$74.8 million;
billion representing 32.7 per cent of
the total government expenditure.
 The government is to support at
least 5 large and 10 medium
The Power Sector and small scale salt producers
to expand production in the
The government plans to increase coastal basins of Western,
generation capacity through various Central, Greater Accra, and
measures. Additional power supply Volta Regions;
generated upon implementing these
measures is expected to be  20,000 hectares of oil palm will
1,141MW. be planted and one specialized

PricewaterhouseCoopers Ghana Budget Highlights: The Economy 9

 The Economy

technology centre for value private sector, human resource

added oil palm products will be development and good governance.
established;
A snapshot of the macroeconomic
 The National Board for Small environment shows that, overall
Scale Industries will organize there are challenges to sustaining
500 tailor-made business the stability achieved over the past
improvement programmes for four to five years. A summary of the
15,000 entrepreneurs by the macroeconomic indicators (table)
end of 2007; below shows that although the
economy did well in achieving 6.2%
GDP growth over the target of
 200,000 employment 6.0%, it did not attain most of the
opportunities will be created; other key indicators. End-of-year
and inflation was down by 2.2%, import
coverage reserves deteriorated
 The government is to implement from 4 months to 3.6 months,
the National Employment domestic primary balance was in
Program (NEP). deficit of 2.1% against projected
deficit of 1.4%, whiles overall
budget deficit fell from 4.5% to 4.9%
General Comments of GDP.

Although GDP growth is stable, it is To meet the challenges of

clear that the economy is underperformance in the other
challenged with shocks from the macroeconomic indicators,
energy sector with respect to rising government has provided directions
world market crude oil prices and to reduce inflation to a single digit
low electric power generation. and reduce domestic primary and
Difficulties regarding effective the overall budget deficit. For
management of public sector example, to balance the budget,
salaries and wages have also government intends to borrow and
added to the challenges facing obtain grants to augment its
public expenditure management revenue inflows. Domestic
thereby affecting the overall budget borrowing, higher public sector
deficit. wage bill, anticipated energy costs
(electricity and fuel), for example,
would be a challenge to achieving
It is however noteworthy that
the macroeconomic targets.
government plans to put in place
policies and initiatives both short- 2006 2006 2007
term and medium to long-term to Projected Outturn Projected
address the energy and public
Real GDP
sector salaries and wages issues. Growth 6.0% 6.2% 6.5%
The responsible government
ministries departments and End of year
inflation 7% - 9% 11.2% 7% - 9%
agencies should therefore focus on
the overall growth of the economy Average
and therefore assist with the inflation 8.8% 11.8% 8.8%
dispassionate implementation of all International
policy initiatives. reserves to
import cover 4 months 3.6 months 3 months
Domestic
Government is focused on growth primary
within an environment of stability to balance % of
trigger off and sustain a true GDP -1.4% -2.1% -0.6%
economic renaissance for Ghana. Overall Budget
Government plans to continue to Deficit % of
pursue its strategy of economic GDP 4.5% 4.9% 3.2%
development through effective

PricewaterhouseCoopers Ghana Budget Highlights: The Economy 10

 2007 Budget Highlights*

*connectedthinking

Direct Taxation
Expectation gaps still persist.
and insurance premiums should,
Final Withholding Taxes also be proportionately reduced.

Final withholding
Final withholding taxes on Capital Gains
taxes reduced for
dividends, management and
dividends, technical services, and rent have
management and been reduced. The capital gains tax rate has been
technical services, reduced from 10% to 5%.
and rent payments
The following reduced rates will be
applicable from 2007: The change was made to
encourage the public to register
changes in the ownership of
Capital gains tax  Dividends - 8% (previously properties.
reduced from 10% to 10%);
5%
National Reconstruction Levy
 Management and technical
services - 15% (previously
20%); and The elimination of the NRL to all
companies, which had previously
been announced in the 2006 budget
 Rent - 8% (previously 10%) has been reconfirmed.

The government has attempted to It is good to see that this temporary

reduce these withholding taxes to tax, which was introduced in 2001,
bring them in line with the reductions has finally been abolished for all
in corporate income tax from 32.5% companies.
to 25% over the past 5 years.
National
Reconstruction Levy Taxation of Benefits in Kind
eliminated for all
This reduction is a positive move,
however, we believe that for the
companies The rates associated with calculating
country to remain competitive
relative to other African countries, benefits in kind with regards to
withholding tax on services provided accommodation and vehicles have
within and outside of Ghana should been reduced as follows:
further be reduced.
Accommodation
Other final withholding taxes on
interests, branch profits, royalties  Accommodation with furnishing
– the calculation of the benefit

PricewaterhouseCoopers Ghana Budget Highlights: Direct Taxation 11

 Direct Taxation
has been reduced from 15% to personal income tax rates or the
10% of the person’s total cash widening and increasing of the bands
emoluments; would have been more appreciated.

 Accommodation only – the Furthermore although the

calculation of the benefit has percentages have decreased in
been reduced from 10% to calculating the tax benefits on
7.5% of the person’s total cash vehicles because the maximum
emoluments; and benefits has not been raised ten
times the previous amount, in most
instances this will result in greater
 Shared accommodation – the taxes for individuals with employer
calculation of the benefit has provided vehicle or fuels.
been reduced from 5% to 2.5%
of the person’s total cash
emoluments. Tax Reliefs for Individuals

Vehicles The government announced that in

line with its objective of increasing
disposable income of taxpayers, the
Tax reliefs for  Vehicle with fuel – the following increases in tax reliefs are
individuals calculation of the benefit has proposed:
been reduced from 15% to 10%
increased
of total cash emoluments; in
addition, the maximum amount  Marriage/Personal relief –
that can be included as a raised from ¢300,000 to
benefit has been increased ¢350,000 per annum;
No change in from ¢300,000 to ¢3,000,000;
personal income  Old Age relief – raised from
tax rates  Vehicle only – the calculation of ¢300,000 to ¢350,000 per
the benefit has been reduced annum;
from 7.5% to 5% of total cash
emoluments; in addition, the
 Children’s Education/Child relief
maximum amount that can be
– raised from ¢240,000 to
included as a benefit has been
¢300,000 per annum;
increased from ¢150,000 to
¢1,500,000;
 Aged Dependent relief – raised
from ¢200,000 to ¢250,000 per
 Fuel only – the calculation of
annum; and
the benefit has been reduced
from 7.5% to 5% of total cash
emoluments; in addition, the  Cost of Training relief – raised
Benefits in kind
maximum amount that can be from ¢200,000 to ¢1,000,000
calculations for included as a benefit has been per annum.
individuals on increased from ¢150,000 to
accommodation ¢1,500,000; and
Whilst these increases are welcome
and vehicles are
news for taxpayers, the government’s
adjusted  Driver, vehicle with fuel – this objective of increasing disposable
new category has been added incomes of taxpayers would have
and the calculation of the been better accomplished by
benefit is 12.5% of total cash broadening the bands and/or
emoluments; the maximum reducing pay as you earn (PAYE) tax
amount that can be included as rates.
a benefit is ¢3,500,000.
Venture Capital Tax Incentives
Whilst these benefits may reduce the
tax burden on some individuals who
have accommodation provided by the The government-sponsored Venture
company, they will not benefit all Capital Trust Fund has signed two
workers and an adjustment to the investment agreements with venture
capital finance companies; however,

PricewaterhouseCoopers Ghana Budget Highlights: Direct Taxation 12

 Direct Taxation
the government would like to see based on land value but will be
more venture capital finance based on flat rates, as follows:
companies involved in the scheme.
 Up to 1 acre - ¢350,000;
Venture capital tax
In this regard the following
incentives
enhancements to the program have  1 acre to 100 acres -
increased been announced: ¢500,000;

 Above 100 acres - ¢10,000

 Full tax exemption from for each additional acre;
corporate income tax, dividend
tax and capital gains tax has  Mortgages - ¢350,000; and
been extended from five years
to ten years;  Discharge - ¢100,000.

These new initiatives may encourage

 Losses from disposal of the land registration.
shares may be carried forward
for up to five years after
disposal (whereas previously Establishment of Tax Arbitration
Tax Arbitration the five year carry-forward was Board (TAB)
Board established only available up to five years
after the tax exempt period
To enhance transparency in tax
expired);
administration and expedite the
resolution of appeals, the
 Distributions of interest, government is proposing the
dividends and capital gains to establishment of a TAB.
investors in venture capital
finance companies shall be tax
The TAB will decide on appeals
exempt; and
against the decisions of the Revenue
Commissioners. The Revenue
 The 100% chargeable income Agencies Governing Board will
deduction granted to financial facilitate the setting-up of the TAB.
institutions investing in venture
capital finance companies is Any agencies that are put in place to
now extended to include all facilitate disputes taxpayers may
corporate and individual have with the authorities must be
investors who invest in venture applauded and hopefully the TAB will
capital finance companies. be as efficient in resolving issues as
the Fast Track High Courts.
This is a positive step in the
continued support of the venture Broadening the Income Tax Base
capital industry in Ghana.

Land registration The government has indicated that a

Title Registration on Land significant percentage of vehicle
initiatives put in
registrations is done by the informal
place
As part of the government’s initiatives sector operators, most of whom are
to encourage land registration and not taxpayers.
investment, the following proposed
changes have been recommended: Any additional measures that will
broaden the tax net to bring in more
Strategy to
broaden tax net  First, the government will waive taxpayers should be supported and
any interest on arrears of rent hopefully, this will result in less tax
owed to the government by burden on those currently bearing the
lessees for 2007; and tax costs of non-paying taxpayers.

 Secondly, to encourage title

registration, fees on land
registration will no longer be

PricewaterhouseCoopers Ghana Budget Highlights: Direct Taxation 13

 Direct Taxation
More Double Tax Treaties to be when it is already burdensome
concluded to receive an income tax
clearance certificate;
DTTs with Sweden and Switzerland
have been initiated and should be  The need for personal tax rates
completed in 2006. to be reduced or the bands
widened to put more disposable
income into taxpayers’ pockets
DTTs are also being pursued with
in line with the new fair wage
Syria, the Netherlands and the Czech
policy;
Republic.

 The absence of adequate

The pursuit of additional DTTs is truly
definitions and terminology
a positive decision and should make
Additional Double under the Tax Code to reduce
Ghana more competitive in attracting
Tax Treaties being misunderstandings between the
investors from these countries.
negotiated taxpayers and the tax
authorities;
However, it is also important to
ensure that once signed, DTTs are
properly and timeously implemented.  The need for the government to
implement a computerised
system that allows the sharing
Comments of information between the
various agencies to reduce
delays and errors in information
The government stated that it is
provided to taxpayers;
determined to promote the practice of
efficient taxation and enhance
confidence in the tax system.  Ensuring the timely issuing of
Tax Clearance Certificates and
WHT certificates;
In addition, the government restated
its commitment to introducing
measures that seek to remove the  Allowing exporters to issue VAT
bottlenecks that impede revenue Relief Purchase Orders on their
generation and collection. main taxable inputs;

Whilst some of the concerns of some  Introduce a mechanism to allow

industries have been addressed, the the offset of taxes refundable
concerns of many others have not against other forms of taxes
been considered. payable; and

For example:  Banks subjected to the same

bad debts provisioning
 The non-availability of loss requirements as other
carry-forwards to all companies; companies when their business
is inherently different to other
companies.
 Withholding tax rates on local
goods and services have not
been reduced to reflect current It is expected that the government
income tax rates; would relentlessly work towards
resolving these concerns of
taxpayers to improve its relationship
 Additional bureaucracy with taxpayers.
introduced that requires the
taxpayer to receive a VAT
clearance certificate at a time

PricewaterhouseCoopers Ghana Budget Highlights: Direct Taxation 14

 Direct Taxation

2007 Budget Highlights*

*connectedthinking

Value Added Tax

Possible administrative burden for businesses due to the
introduction of VAT Clearance Certificates
drugs, VAT is to be eliminated on raw
Overview materials and packaging materials
used in the manufacturing of drugs
Overall, there were no major changes for the treatment of HIV/AIDS,
to VAT; although certain incentives malaria and tuberculosis.
were introduced to encourage the
pharmaceutical industry. The key All other locally produced
changes are summarised below: pharmaceutical products will be zero-
rated.
VAT Clearance Certificate
This measure is expected to make
In order to assist the VAT Service in locally produced pharmaceuticals for
achieving its target of 100% these selected illnesses competitive
compliance, VAT clearance against their imported substitutes.
certificates (VCC) will be issued to
businesses in good standing. These It is hoped that, no problems will arise
certificates will be issued upon from what are and what are not raw
VAT Clearance
application from the first quarter of materials used in the drugs referred
Certificate introduced 2007. The VCC will have a six-month to.
validity period and will be necessary
for competitive tendering and clearing
goods from the ports, for example. With regards to the drugs associated
with HIV/AIDS, malaria, and
tuberculosis, the manufacturers
The introduction of the VAT would be more pleased to see these
clearance certificate may increase as zero-stated opposed to exempt as
the administrative burden of this would allow them to claim input
taxpayers and may, for example, credits.
3% flat rate scheme prolong the process of clearing goods
for the informal sector from the ports. The VAT Service’s
efforts to eliminate red-tape in the Standard VAT Rate
VAT process may suffer a set-back
as a result of the introduction of the This year is to see the
VCC. implementation of the flat rate
scheme of 3%. This initiative is
VAT Exemptions to targeted at the informal sector and
VAT exemptions on Pharmaceutical Industry the rate would be applied to the
certain taxable persons without recourse to
pharmaceutical raw input VAT claims.
materials In order to encourage local
pharmaceutical industries to increase
production of locally manufactured

PricewaterhouseCoopers Ghana Budget Highlights: Value Added Tax 15

 Direct Taxation

2007 Budget Highlights*

*connectedthinking

Customs & Excise

Some changes geared towards enhancing efficiency and
effectiveness
reduce or eliminate fraudulent
Reduction in Concessionary practices.
Import Duty Rate

Any move towards enhanced

The Minister has proposed a computerisation should be
reduction in the concessionary import commended.
Levy on timber duty rate from 10% to 5% for raw
exports to be materials covered under this regime.
reviewed during 2007 Levy on Timber Exports

This is a step in the right direction as

it will encourage local manufacturers The levy on timber exports is to be
to increase production and give them reviewed during 2007. However, the
a balanced platform to compete existing rate of 3% will remain in use
against their foreign counterparts. for now.

No Import Duties on Selected

Introduction of Computerised
Pharmaceuticals
Initiatives
Elimination of import
duties on selected In a bid to encourage local
The Customs Excise and Preventive
pharmaceuticals pharmaceutical manufacturers,
Service (CEPS) aims to introduce the
import duties will be eliminated on
following:
raw materials and packaging
materials used in the manufacture of
 Electronic transactions price HIV/AIDS, malaria and tuberculosis
database; drugs.

Continued
computerisation of  Verification of customs clearance Rationalisation of Excise Taxes
status of vehicles;
CEPS
During 2007, a comprehensive bill
 Provision of vehicle database; will be prepared to convert excise tax
and on alcoholic drinks, malt drinks,
carbonated soft drinks, cigarettes and
Excise taxes to be other tobacco products from the
revised from current  Electronic transmission of current ad valorem regime to a
ad valorem regime to permits, licences and other specific rate structure. Details of
specific rate structure authorisation to CEPS via GcNet. implementation will be finalised by
the end of March 2007.
These measures are intended to
facilitate the clearing of goods and

PricewaterhouseCoopers Ghana Budget Highlights: Customs & Excise 16

 Customs & Excise

This will have a general effect of Importation of Used Motor

reducing excise taxes on beer, stout Vehicles
Policy on and carbonated soft drinks. Excise
importation of tax on cigarettes will also be reduced;
used motor however, taxes on spirits will be There will be changes to the mode of
vehicles to be increased. depreciation of used vehicles for
valuation purposes and a review of
reviewed in
the relevant policy during 2007. This
order to will be aimed at discouraging the
discourage importation of over aged vehicles.
importation of
over aged
vehicles

PricewaterhouseCoopers Ghana Budget Highlights: Customs & Excise 17

 Customs &Excise

2007 Budget Highlights*

*connectedthinking

Sectoral Outlook
Sectoral Performance and outlook for 2007
Introduction
 development of the rural
The Ministries, Departments and economy through the
Agencies (MDAs) continue to follow modernisation of agriculture led
Development
the development agenda outlined in by a vibrant and competitive
agenda of the the GPRS II. private sector;
government still
based on direction
of GPRS II
Thus selected policies, programmes  enhanced infrastructure
and activities of MDAs have been development; and
geared towards addressing structural
constraints from the previous year to
increase productivity, adopt new  sustained environmental
technologies and further enhance the protection through re-
Three thematic competitiveness of the private sector afforestation.
areas identified in relation to the agriculture, industry
under GPRS II
and service sectors. Agricultural Sector

With the agriculture sector being the

The focus of MDAs in 2007 will
champion for accelerated growth, the
therefore be on:
MOFA will focus on the following
policies and programmes:
 Infrastructure development
Strengthening the (especially in energy, roads,
capacity of the telecommunication, water supply  Promoting selective crop
and housing); development;
private sector as
the engine of
growth  Implementation of right incentive  Modernising livestock
framework for public sector development;
employees; and
 Improving access to mechanised
 Effective decentralisation for agriculture;
enhanced service delivery.
11 key MDAs to  Accelerating the provision of
lead in drive Private Sector Development (PSD) irrigation infrastructure;
towards
achievement of In furtherance of the government’s
strategy to make the private sector  Increasing access to extension
competitive private
the key vehicle for accelerated services; and
sector.
growth and development, policies will
continue to focus on the following:  Enhancing access to credit and
inputs for agriculture.

PricewaterhouseCoopers Ghana Budget Highlights: Sectoral Outlook 18

Sectoral Outlook

Agricultural Financing  Computerisation of the existing

land sector agencies will
Credit will be disbursed to farmer continue;
groups for production, storage,
processing and marketing.  Human resource capacity
development will be undertaken
The Food Crop Development Project to train the staff of the land sector
(FCDP) will make credit available to agencies; and
1,500 eligible farmers.
 Collaboration will take place with
Cocoa Industry the Millennium Development
Authority to establish land title
registration services.
 In the 2006/07 Crop Season
cocoa output is projected at
600,000 metric tonnes; The Land Valuation Board (LVB), in
The government partnership with Private Sector
has put in place Valuers, will carry out the revaluation
 Producer Price of ¢9,150,000 per of properties within the Accra
measures to boost metric tonne is set for the Metropolitan Assembly area.
the cocoa industry 2006/07 cocoa season. The new
price for a bag of 64 kg is now
¢571,875 as against a previous Forestry Sector
price of ¢562,500; and
The Ministry of Lands, Forestry and
 Government has supported Mines (MLFM) will undertake the
The MLFM will Ghana COCOBOD to secure a following:
initiate key policy pre-export trade finance facility of
measures to US$810 million from external  260 timber leases will be
improve forestry and financial institutions. The facility, converted to Timber Utilisation
allows COCOBOD to withdraw an Contracts. Conversions are
wildlife contribution
additional US$70 million to expected to increase revenue
to national wealth
finance the 2007 Light Crop generation; and
purchases.

 Wildlife institutional capacity will

Lands Sector be built to enhance management
of competitive and transparent
.
Activities of the Land Administration international tendering in respect
Project will be strengthened. of the commercialisation of
Activities will include: wildlife related infrastructure.

The drafting of new legislation for Mines Sector

land administration and institutional
reform will be completed and laid The MLFM will continue to regulate
before parliament; the use and handling of explosives
through the issuance of permits and
The coming in force of a new directing the manner in which
legislation for land administration explosives should be stored and
should help to address the problem of disposed of.
land dispute in the country, and
promote investor confidence in
The MLFM will continue with
acquiring and developing lands for exploration and geological mapping
business activities; of targeted areas to generate
geological information for appropriate
 The inventory of state lands will policy decision making and for
continue in the 3 northern dissemination to the general public,
regions; especially investors.

PricewaterhouseCoopers Ghana Budget Highlights: Sectoral Outlook 19

 Sectoral Outlook

The MLFM will continue to assist will be allowed to import crude oil for
small scale mining cooperatives. refining.

Energy Sector Much as the liberalisation of the

downward stream sector would in no
doubt help in the development of the
A number of initiatives will be enacted
The energy sector economy there should be control
to address the energy sector
challenges measures to prevent the adulteration
challenges and to ensure continuous
of fuel in the refinery process.
supply of reliable energy:

The government will continue to

 The medium term strategic goal encourage investment in the search
Liberalisation of the for the Power Sub-sector is to
Petroleum Sector to for Ghana’s hydrocarbon resources.
restore the power generating The search in deep waters will be
speed up private capacity of the country and also boosted and exploration in the Voltain
sector investment. to upgrade the infrastructure in Basin is expected to commence in
order to improve the reliability of 2007.
power supply; and

To facilitate the development of

 The Volta River Authority (VRA), renewable energy resources, a
Establishment of in collaboration with the Ministry Renewable Energy Law will be
cold chain facility of Energy (MOE) has concluded enacted to provide the legal
from farm gate to arrangements to procure an 80 framework for accelerating the
market centres MW power plant which will be development of renewable energy in
operational by April 2007. the country.

Under the Self Help Electrification Ministry of Trade, Industry, PSD

Project (SHEP)-4 Programme, over and Presidential Special Initiative
200 communities will be connected to (MOTI, PSD & PSI)
the national grid in 2007.

The MOTI policy direction for 2007

The full unbundling of VRA will be will be to develop a vibrant,
completed in 2007 with the technology-driven, competitive
establishment of a separate industrial sector that significantly
Electricity Transmission Utility (ETU). contributes to economic growth and
employment creation. This will
The MOE will continue to promote involve mass mobilisation of the rural
and install solar powered systems in communities and other vulnerable
selected institutional facilities under groups, including women.
the Ghana/Spanish Loan protocol.
The MOTI will facilitate the
The MOE will initiate practical establishment of a cold chain facility
regulatory measures to speed up from the farm gate to export market
development of renewable energy centres as well as reducing clearance
technologies, particularly wind, solar time.
and waste-to-power.
The National Industrial Policy, which
Petroleum Sector will focus on strategic sectors to drive
the continuing industrialisation
process, will be completed.
The medium term strategic goal is to
fully implement the liberalisation of
Tourism
the downstream sector, speed up
private sector investment and
manage the impact of rising crude oil To accelerate community-based
and petroleum product prices on the tourism and integrated development,
national economy. Within the context the Ministry of Tourism and Diasporan
of the liberalisation, the private sector Relations (MOTDR) intends

PricewaterhouseCoopers Ghana Budget Highlights: Sectoral Outlook 20

Sectoral Outlook

organising five major international Sports

fairs and exhibitions to promote
Ghana as a tourism destination:
In 2007, various preparatory activities
Development of including work on construction of
sports facilities to  A week long Paragliding Festival Sekondi and Tamale stadia as well
to boost both domestic and as the rehabilitation of the Ohene
meet international
international tourism at Atibie Djan Stadium, Accra El Wak
standards
during the Easter celebration; Stadium, Accra and Baba Yara
Stadium, Kumasi will be completed.
In addition, 20 community parks will
 Emancipation and Panafest also be upgraded.
celebrations scheduled from 21
July 2007 to 5 August 2007;
Preparations towards the CAN 2008
will certainly result in the
 Launch of the “Akwaaba - development of sports facilities in line
Anyemi’’ programmes, dubbed with international standards. This is
the “Joseph Project”, aimed at expected to market Ghana to the
attracting Ghanaians back to world during the CAN 2008 sporting
Ghana; events.

 National Chocolate Day to Health Sector

coincide with Valentine’s Day on
14 February; and
In 2007 the health sector will begin
the implementation of the new health
 Tours to Tetteh Quarshie Cocoa policy focusing on achieving three
Farm at Mampong and other inter-related and mutually reinforcing
cocoa growing areas. objectives:

ICT Sector  Ensuring that children survive

and grow to become healthy and
productive adults that reproduce
To create an effective ICT
without risk of injuries or death;
environment, the Ministry of
Four new ICT bills to Communication will submit four bills,
be presented to the Electronic Transaction Bill, the  Reducing the excess risk and
parliament. Telecommunications Bill, the National burden of morbidity, disability,
Communications Authority (NCA) Bill and mortality, especially in the
and the National Information poor and marginalized groups;
Technology Agency Bill through and
Cabinet to Parliament for approval in
2007.
 Reducing inequalities in access
to health, population and nutrition
Educational Sector services.

Basic Education National Health Insurance Scheme

The drive towards the attainment of The Ministry of Health (MOH)

Universal Primary Completion by together with its collaborative
2015 and Gender Parity by 2008 will agencies will sustain the NHIS and
be given additional impetus. expand its coverage nationwide to
about 55 per cent of the population.
The Capitation Grant Scheme to
increase access to basic education Divestiture Implementation
will be sustained and government will Committee (DIC)
also continue to subsidise the
examination fees of the BECE.
In 2007, the DIC will continue to
focus on off-loading government

PricewaterhouseCoopers Ghana Budget Highlights: Sectoral Outlook 21

Sectoral Outlook

shares in existing companies through borrowers will be assisted with

the Ghana Stock Exchange. This will credits.
Private sector ensure public participation in the
enterprises remain ownership of divested State Owned
Public Procurement Board
imperative to Enterprises (SOEs) and improve
national revenue flow to the government.
development, self The board will undertake the
dependency and The continued divestment of SOEs following activities:
poverty reduction. supports governments’ assertion that
the private sector is the engine of  Assessment of 200 entities to
growth. This exercise is expected to determine their level of
revamp very important businesses compliance with the Public
that have gone down, and also create Procurement Act;
more employment opportunities.

 Development and organisation of

The Ghana Investment Promotion training for 500 procurement
Centre (GIPC) entities;

GIPC will continue to create and  Implementation of the Web-

facilitate the atmosphere for domestic based procurement planning
and foreign investment in various software;
sectors of the economy (with the
exception of mining and petroleum).
 Completion of the development of
software for procurement
In 2007, the GIPC will continue to planning, recording and
implement its corporate plan in management, and roll out to all
Investment drive for conjunction with relevant government MDA’s and MMDA’s; and
accelerated agencies whose activities have a
development and direct bearing on GIPC. Key areas of
job creation implementation will be to improve the  Further consultations with
enabling environment, investor stakeholders on the Domestic
facilitation and servicing, investor Content Bill which offers
promotion and generation, review of incentives to firms operating in
the restructured one-stop-shop for Ghana to use a specific
impact and institutional development. percentage of their inputs from
domestic sources.
In this golden age of business, there
is the need to make the GIPC’s one- Non-Tax Revenue Mobilisation
stop-shop concept a reality. This will
facilitate doing business in Ghana
To improve non-tax revenue
and thus project the country as the
collection, the Ministry of Finance and
preferred investor destination.
Economic Planning (MOFEP) will
implement the following measures:
Micro-financing and small loans
 Work with Bank of Ghana and
Government continues to pursue its Commercial Banks to introduce
policy of supporting the development on-site banking, and where
and growth of a sustainable micro possible to facilitate the collection
financing system under GPRS II as a of non-tax revenue and internally
means of reaching the productive generated funds (IGFs) at MDA
poor of society with credit and other premises;
financial services. Some steps have
been taken to strengthen the micro
credit and small loans scheme.  Work with the IAA to carry out
auditing of (IGF’s) of selected
MDA’s and MMDAs and District
It is expected in 2007 that 110,000 Assemblies in order to strengthen
micro and 22,000 small scale their collection mechanisms,

PricewaterhouseCoopers Ghana Budget Highlights: Sectoral Outlook 22

Sectoral Outlook

improve internal controls and who prepare fictitious accounts;

reduce revenue leakages; and

 Collaborate with the Ministry of  As part of CEPS’ programme to

Local Government and Rural deepen automation of the
Development to implement processes and procedures, all
agreed measures to improve the MDAs whose license, permit or
capacity of MMDA’s to generate any other form of authorization or
revenue; and approval (including those for
exemptions) is required in the
import/export trade, shall be
 Facilitate the review of obsolete required to be connected to the
and unrealistic fees and charges GCNet not later than 1 April
by MDAs. 2007.

Internal Revenue Service (IRS) This measure will not only facilitate
clearance of goods but also eliminate
The IRS will undertake the following fraudulent practices by both traders
activities: and officials in the procurement and
utilization of such facilities.

 Establish 5 per cent withholding

tax monitoring units to draw deal VAT
with non-compliant taxpayers to
Internal Revenue
help maximize collection; Registration and Enforcement
Service (IRS) to
run a database of
its operations.  Intensify tax education, Physical surveillance of VAT
enforcement and audit; registered businesses will be stepped
up to complement the invoice
invigilation and improve compliance.
 Re-launch the tax stamp and
establish the Small Taxpayers
Bureau to administer the rent tax Use of Cash Registers
and tax stamps; and
VAT services to In 2003 VAT and import duty on cash
enhance the use  Commence full computerisation registers were removed to enable
of Cash Registers of its operations. small and medium size enterprises
(SMEs) dealing in high volume low
value goods acquire them. The
Customs Excise and Preventive objective was to improve their record
Service keeping and financial management
capabilities. In year 2007 the VAT
CEPS will undertake the following Service will capitalise on this initiative
activities: by further enhancing existing retail
schemes and own-invoice
dispensations to ensure that full
 Enhance the performance of advantage is taken of the control
personnel through Capacity mechanisms inherent in these
Building programmes; technologies to boost compliance by
SMEs with the requirements of the
VAT law and thereby enhance VAT
 Commence electronic
revenue.
transmission of permits, licenses
and other authorization to CEPS
(GCMS) via GCNet; Ministry of Public Sector Reform

 The GCNet Unit in the Research The Ministry of Public Sector Reform
Division will be made fully will continue its activities in close
operational to capture taxpayers collaboration with implementing

PricewaterhouseCoopers Ghana Budget Highlights: Sectoral Outlook 23

Sectoral Outlook

agencies to achieve the following  The revision of the Companies

goals: Code, which has been on-going
may be completed by the second
quarter of 2007.
 Records Management
improvement;
The revision of the Companies Code
is expected to make the provisions
 Public Sector Pay and Pension therein clearer to the business
Reform; and community. The revision is also
Public Sector expected to bring the Code in line
Reform continues  Facilitate and of the deployment with current business law practices.
unabated of ICT infrastructure and skills
within the Civil Service in order to Ministry of Interior
ensure the efficient execution of
government programmes.
Activities to be undertaken by the
Ministry of Interior in 2007 will
In particular the Ministry will: include:

 Implement the new salary  Formulate policies on Migration

structure for all public sector and Work Permits; and
workers;

 Computerise the immigration

 Establish a National Commission procedure.
on salary administration;

Immigration  Restructure the public service

procedures to be including the establishment of
computerised competitive recruitment, selection
and training; and

 Establish performance based

administration.

Ministry of Justice

The Ministry of Justice will continue

with the following activities in 2007:

 Continue with the implementation

of business registration and
Business licensing reform strategy to
registration to be minimise the number of days for
enhanced to registering business from 14 to 5
days. To make the registration of
attract investors
businesses more accessible, the
Registrar General’s Department
will open regional offices in
Kumasi and Tamale.

The effective implementation of

business registration and licensing
reform strategy will certainly resolve
the delays in business registration
and encourage more investors to do
business in Ghana.

PricewaterhouseCoopers Ghana Budget Highlights: Sectoral Outlook 24

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*connectedthinking