Commissioner General Briefs Media

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Commissioner-General Briefs Media

STATEMENT BY COMMISSIONER-GENERAL, GRA, MR. GEORGEBLANKSON AT A MEDIA BRIEFING ON MONDAY 31ST JANUARY 2011

Good morning Ladies and Gentlemen of the media; you are welcome to the Ghana RevenueAuthority.

We have invited you here to address four main issues:

(i) Update on the reform to establish an integrated revenue authority from the erstwhile revenueagencies;(ii) Revenue performance for 2010 and expectation for 2011;(iii) Fiscal policy initiatives contained in the 2011 Government Budget which GRA has themandate to implement; and(iv) The way forward for GRA in 2011.

Integration/Modernisation

Integration and modernisation rest on equal footing with revenue enhancement as thecornerstones on which the GRA superstructure is founded.

The implementation of the GRA Act (2009), Act 791, took off in earnest with the appointmentof a Commissioner-General in March, 2010. Since then, the process of establishing anintegrated revenue authority has gained momentum and a number of milestones have beenmet. Commissioners for the Divisions defined in the GRA have been appointed, putting theoperational areas of the customs and preventive functions under Commissioner (CustomsDivision). There has been a merger of the operational wings of erstwhile IRS and VAT Serviceunder Commissioner (Domestic Taxes Revenue Division) and the management support serviceunits (e.g. Finance, Administration, Research, IT etc.) have been put under Commissioner

(Support Services Division). Workshops involving personnel drawn from the vertical andhorizontal cross-sections of the GRA have been made and a Vision, Mission and Core valueshave been developed.

Additionally:

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- The Project Management approach has been officially adopted as the vehicle for the

integration;- From the strategic goals developed by GRA staff through workshops, a Strategic Policy

Document has been prepared for adoption;- A GRA logo has been developed and adopted to hold a central place in re-branding theGRA.

Review of Tax Legislation

Putting taxpayer convenience at the heart of the on-going reforms, the GRA modernisation hasas a key focus the review of the tax legislations for purposes of simplifying them andstreamlining processes and procedures.

A draft of a consolidated Administration Act has been produced which brings together theadministration provisions in the Acts under which direct tax, VAT and indirect taxes andcustoms duties are administered.

Automation

In the year 2010, the GRA also made considerable progress in working with private partners inthe development of an integrated revenue information system which will provide one platformfor the administration of all domestic taxes under the e-Gov project. Considerable investmentof time and efforts were also made in business processes re-engineering and businessrequirement specifications.

Tax Revenue

At the end of 2010, the Ghana Revenue Authority was able to collect GH5,944.05 million,exceeding its revenue target of GH5,916.05 million, by 0.5% and posting a 23.6% growth inrevenue over 2009 collections.The breakdown of the 2010 collection is as follows:

- Domestic Taxes (Direct Tax) GH2,441.33million- Domestic Taxes (Indirect Taxes) GH1,061.22million- Customs (including petroleum) GH2,442.15million

2011 Budget and Tax Revenue

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This year, the GRA has a collective target of about GH7,531.06million including petroleumrevenue. It is worth mentioning that revenue expectations from upstream petroleum amount to

only GH321.86million i.e. 4.3% of our total tax revenue. The management of GRA is devisingstrategies to increase revenue mobilisation to meet this target.

Ladies and Gentlemen of the Press, since the presentation of the budget and economic policyfor 2011 by the Minister of Finance and Economic Planning, Parliament has passed thefollowing laws on taxes:

1. The Customs and Excise (Duties and other Taxes) (Amendment) Act, 2010, Act 809

- Act 809, 2010 imposes a 20% excise tax on plastic packaging materials (but excludes

packaging for water & mineral water).- The Act also reduces the ad-valorem excise duty on all excisable goods except spirits and

cigarette.- Light Emitting Diodes (LED) lamps for domestic and public lighting are zero-rated.

2. The Value Added Tax (Amendment) Act, 2010, Act 810

- The Act raises the threshold for registration for VAT at the standard rate to GH90,000.- A new combined VAT and income tax assessment to cater for businesses that fall below

the VAT threshold of GH90,000 is under consideration for introduction and implementationsoon. This will ensure that no trader stays outside the VAT and income tax system. Until thesechanges are effected, VAT registered businesses with turnover between GH10,000 and

GH90,000 will be notified in writing to account for the tax at the flat rate of 3%. The Actexempts locally produced pharmaceuticals, textbooks and agricultural machinery and toolsfrom the scope of VAT.

- The Act also revokes the Ghana Investment Promotion Centre (Promotion of Tourism)Instrument 2005 (LI 1817). Concessions granted to hotels and the hospitality industry underthat LI therefore no longer apply.

3. The Debt Recovery (Tema Oil Refinery Company) Fund (Amendment) Act, 2010, Act 811

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- Act 811 adjusts upward the Debt Recovery Levy on petroleum products including;Premium, Gas Oil, Marine Gas Oil, Residue Gas Oil, Residue Fuel Oil, Liquefied PetroleumGas

- The zero rates on Premix and Kerosene still apply.

4. National Fiscal Stabilisation Levy (Amendment) Act, 2010, Act 812

- The National Fiscal Stabilisation Levy, introduced in 2009, has been extended for an

additional year.

5. Airport Tax (Amendment) Act, Act 813

- Act 813 raises the Airport tax as follows:- Domestic travel - GH 5- Regional travel (W. Africa) - US$60- International flights outside W. Africa:- Economy - US$100- Business - US$150

- First Class - US$200

6. Internal Revenue( Amendment) Act, 2010 Act 814

- The five year tax exemption for real estate developers has been abolished.

- However, those who are certified by the Ministry of Works and Housing that they areengaged in the construction for sale or letting of low cost affordable housing units will continueto enjoy the exemption.

- The rate of Gift Tax has been raised to 15%- The threshold for withholding tax has been increased from 50 currency points (GH50) to

500 currency points (GH500). This was done to relieve businesses from the need to withholdtaxes on low expenses.

- The level of personal income tax reliefs has been increased as follows:

2006 rates (GH) New rates (GH)Marriage/Dependents 30 100

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Old Age 35 100Children Education(up to 3) 30 100Aged Dependants (2) 25 50Training Cost 100 200

These Acts were gazetted on 31st December, 2010.

We also wish to bring the following to your attention:

- The personal income tax rates as provided for in the budget statement will become

applicable after passage of the relevant regulations by the Minister of Finance. We will informyou as soon as this is done.

- Tax Stamp rates are being reviewed.

- The level of Vehicle Income Tax (VIT) for commercial vehicles is being reviewed.- The revised rates will apply after the passage of the Legislative Instrument.- The Bonded Warehousing facility is also being reviewed.

This year the Authority will focus attention on streamlining the operation of Customs BondedWarehouses, VAT Refunds, Issuance of Permits and the Communications Service Tax to boostrevenue collection.

Challenges

The tax reform/modernisation agenda involving the establishment of an integrated revenueauthority is on course. But no tax reform can be a bed of roses, hence the famous saying thatTax reform is not for the faint hearted.

Even in these nascent stages, our reform has had its fair share of challenges.

The task of pressing ahead with the reform while keeping up with revenue collection is like juggling two balls in the air. The slightest distraction could result in them being dropped.

The many training sessions and workshops are necessary for the reform and yet they takepersonnel off the hands on revenue collection duties.

Thankfully the year 2010 saw us staying the course with our reforms and still meeting ourrevenue target.

Institutional loyalty to the erstwhile agencies expressed itself in various ways. We continue tohave staff associations, labour unions etc that are largely based on the old agencies andpresent demands which do not give much cognisance to the reality of all of us belonging to one

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authority.

The Way Forward

Management is committed to ensuring that the two prongs of tax reform and revenueenhancement are kept in perfect balance and proceed in tandem.

In 2011 and beyond, the performance of the managers will be measured on both scores.

On agency-based institutional loyalties, it is heart-warming to note that labour leaders havealready taken the first steps in unifying the labour front and merging staff associations.

The reform process aimed at putting revenue collection on a higher growth path in the longterm will be supported by short and medium term measures which will include the following:

1. Intensify Arrears Collection i.e. Debt Management2. Intensify Tax Audit3. Proper and Effective Management of Information at the District Offices4. Close Monitoring to ensure compliance by Large Taxpayers5. Sustained Tax Education for all of Taxpayers6. Quick Examination of Submitted Returns

7. Expansion of Automation Process8. Audit on the Basis of leaked information

The precipitous drop in revenue/GPD ration from 21.4% to a mere 12.6% in the wake of there-basing raises the need for a comprehensive review of our collection procedures andprocesses.

But it also calls for a hard look at our policy of using tax waivers and exemptions as incentivesfor attracting Foreign Direct Investment. As we make our appearance on the stage of middleincome countries, we need to consider the alternative policy of collecting all taxes due andapplying the revenue to develop our infrastructure and trained manpower that will attractinvestors.

Over the years financing both capital and re-current expenses including staff emoluments hasbeen a huge challenge. I must say that this is an age-old problem. It has resulted in the GRArunning down its capital assets over the years. Yet our revenue collection of GH5,944.69 in2010 (amounting to approximately US$4.0 billion) makes the GRA the most viable area forgovernment investment. An additional direct investment that yields 10% growth in collectionwill mean additional US$400 million in a year.

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We know 2011 will be full of challenges. We seek your cooperation and hope once again weshall achieve or even exceed our revenue target for the year 2011.

Thank you and May God bless us all.

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Commissioner General Briefs Media

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