The Ghanaian government is exploring alternative revenue-generating measures following the abandonment of its value-added tax (VAT) on electricity earlier this year. One of the proposed solutions is to tax the foreign incomes of resident Ghanaians. In this post, we’ll delve into the details, implications, and significance of this proposed tax measure.
Details of the Revenue Gap
The government’s introduction of a VAT on electricity at the beginning of the year was met with significant public backlash, leading to its abandonment. This decision has created a revenue gap estimated at GHC 1.8 billion, which was part of the revenue measures in its International Monetary Fund (IMF) deal.
The Proposed Tax on Foreign Incomes:
In a recent press conference, Finance Minister Dr. Mohammed Amin Adam and Ghana Revenue Authority (GRA) Commissioner Ms. Julie Essiam announced the proposed tax on foreign incomes of resident Ghanaians as a means to close the revenue gap.
Ms. Julie Essiam clarified that the tax would target resident Ghanaians who spend a cumulative 183 days in the country, not Ghanaians living abroad. She emphasized that strong and structural measures have been put in place to ensure the effectiveness of this revenue-generating measure.
Implementation and Voluntary Disclosure:
The implementation of this tax measure has begun, with the GRA mobilizing its team to draft letters to individual account holders. If individuals voluntarily disclose the amount in their foreign accounts within three months, the interest on the account will be waived as part of the voluntary disclosure aspect of this measure.
Why This Matters:
Ghana’s deal with the IMF includes certain expenditure rationalization and revenue measures aimed at ensuring fiscal consolidation of the economy. The proposed tax on foreign incomes is a strategic move by the government to generate additional revenue and meet its fiscal targets.
Conclusion:
The Ghanaian government’s proposal to tax the foreign incomes of resident Ghanaians is a significant development in its efforts to bridge the revenue gap created by the abandonment of the VAT on electricity. While this measure aims to generate additional revenue, its implementation and impact on resident Ghanaians remain to be seen. As the GRA begins to enforce this tax measure, it will be essential to monitor its effectiveness and the public’s response in the coming months.