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
 Accumulation of international
reserves to at least three
months of import cover;
 Domestic primary deficit of
0.6% of GDP; and
 An overall budget deficit of
3.2% of GDP.
Direct Taxation
To encourage land title registration
and investments, a one year
interest waiver amnesty has been
introduced on rent owed to the
government.
In addition, land title registration
fees will no longer be based on the
value of the land but rather at flat
rates.
Various tax reliefs for individuals
have been increased.
The taxation of accommodation and
vehicle benefits in kind has been
revised. This revision will decrease
the taxable benefit for
accommodation but in most cases
increase the taxable benefit on
vehicles to employees.
A Tax Arbitration Board is to be
established to spur transparency in
tax administration and expedite
resolution of appeals.
The National Reconstruction Levy
(NRL) is completely abolished with
effect from 1 January, 2007.
Tax incentives including 10-year tax
holidays, exemptions from dividend
and capital gains tax have been
announced for venture capital
finance companies.
All persons who invest in venture
capital finance companies will have
their investments deductible for tax
purposes.
The withholding tax rates on
dividends and rent will be reduced
PricewaterhouseCoopers
to the rate of 8%, while that
applicable to management and
technical fees will be reduced to
15%.
During 2007, government plans to
develop and implement a system
that will enable the government to
assess and collect income tax using
the value of vehicles registered.
The government remains focussed
on entering into double tax treaties to
eliminate double taxation on incomes
earned in Ghana.
Capital gains tax is to be reduced to
the rate of 5%.
Value Added Tax (VAT)
In addition to the existing
requirement to obtain an income tax
clearance certificate (TCC), taxable
persons will now be required to
obtain a VAT clearance certificate to
tender for contracts and to clear
goods from the ports.
VAT on packaging materials used in
the production of drugs for the
treatment of HIV/AIDS, tuberculosis
and malaria will be removed.
All pharmaceutical products will be
zero rated.
Customs and Excise
To rationalise the indirect tax
regime and bring it in line with
international trends, excise duties
are generally no longer to be
calculated on an ad valorem basis.
Excise duties on beer, stout,
branded spirits, wines, malt drinks,
carbonated soft drinks, cigarettes
and other tobacco products will be
taxed at specific duty rates.
Government intends to review the
current import duty exemption
regime to eliminate abuse and to
target the productive sectors of the
economy.
Ghana Budget Highlights: Overall Summary 2
Overall Summary
The concessionary rate on raw
material imports has been reduced
to 5%.
Sectoral Outlook
Agriculture
Ministry of Food and Agriculture
(MOFA) will focus on the policies
and programmes aimed at
enhancing agricultural output in
order to achieve poverty reduction
as well as food security in the
country.
To ensure the welfare of cocoa
farmers, the government has
resolved to pay a bonus for cocoa
purchases for the 2005/06 main
crop season.
The government is also to promote
the use of local rice and poultry by
all public institutions.
Energy
In response to the increasing
demand for energy in the country,
the government will restore and
upgrade various energy generating
facilities. The government, in
collaboration with its development
partners, will initiate new energy
generation projects around the
country.
The Petroleum Exploration law is
expected to be reviewed in order to
make Ghana an attractive
destination for investments in hydro
carbon exploration.
The government has also reiterated
its commitment to fully implement
the liberalisation of the downstream
sector. In the context of the
liberalisation, the private sector will
be allowed to import crude oil for
refining.
Tourism
As part of promoting Ghana as a
tourist destination, the government
PricewaterhouseCoopers
intends to continue its participation
in major international fairs and will
embark on a strategy of promoting
domestic tourism within the country.
Road Infrastructure
The key milestone for the country is
to become a transport hub for West
Africa. To achieve this, the
government will be pursuing a
number of measures during the
2007 financial year. Key among
these is continuing with the
maintenance and completion of on-
going projects as well as initiating
new development projects. These
developments will largely be
financed with the support of the
nation’s development partners.
To raise additional revenue for road
maintenance, the government has
proposed an increase in the fuel
levy of US$0.02 as well as
increases in other road user fees
and levies.
In a bid to enhance transport
management, the government will
be developing strategies to
systemise annual registration of
vehicles in the country.
Information Communication Technology
(ICT)
During 2006 the telecommunication
industry experienced significant
growth marked by increased
subscriber numbers.
The government will focus on
developing the legal and regulatory
framework for the sector. In
addition, it will adopt ICT in its
operations in order to promote
accountability, transparency and
efficiency in its service delivery.
Health
The National Health Insurance Fund
(NHIF) experienced a growth in its
registered members in 2006 and the
target is to continue expanding the
coverage in 2007. The government
will also continue to intensify its
Ghana Budget Highlights: Overall Summary 3
Overall Summary
efforts at improving access to
quality and affordable health
services to all Ghanaians. To
achieve this, the sector ministry and
allied agencies are expected to
implement programmes that will
involve capital investments in the
health sector, capacity development
through personnel training,
promotion of healthy lifestyles, and
an increase in funding for the fight
against HIV/AIDS, malaria and
guinea worm among other common
diseases.
Good Governance
and establish the Fair Wages
Commission which will be tasked
with the responsibility of
administering the new
comprehensive pay structure.
New National Passports
New passports with enhanced
security features that meet the
required international standards are
to be introduced. Additionally,
electronic visa processing systems
are to be introduced at the various
consulates.

The focus of the good governance Ghana Investment Corporation

strategy under the GPRS II is to
empower state and non-state
entities to participate in the
development process, as well as to
promote peace and stability in the
country. To achieve this objective,
the government will continue to
promote effective, responsible,
transparent and accountable state
machinery. The government will
also strive to create an enabling
environment for the private sector
and continue to support efforts to
accelerate growth and reduce
poverty.
The government is to establish the
Ghana Investment Corporation
which will encourage private sector
participation in the financing of
infrastructure projects that will have
economic returns. This entity is
earmarked to acquire shares in
international and multinational
companies that purchase raw
materials from Ghana for
processing.
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)
policy rate. The BoG prime rate
was dropped 100 basis points
in January 2006 and has since
been maintained at that level;
and
 As at September 2006, the cedi
had remained relatively stable
against foreign currencies; it
depreciated by 9.5% against
the British Pound, 7.8% against
the Euro and a moderate 0.9%
against the US Dollar.
Total receipts at
Fiscal Performance
December 2006 are
expected to be
covered by total
The overall budget balance out turn
was a 4.9% deficit of GDP
payments of ¢41.4
compared to a 3.8% deficit in 2005.
trillion. The domestic primary balance
worsened, being at 2.1% deficit of
GDP compared to a 0.7% surplus of
GDP in 2005.
Despite the significant
Total receipts at the end of
lowering of the Bank of September 2006 outperformed the
Ghana’s prime rate, results for the 2005 corresponding
Deposit Money Banks period, helped partly by ¢1,826.4
did not reciprocate by billion Multilateral Debt Relief
significantly lowering
Initiative (MDRI). Provisional
figures for total payments recorded
their lending rates.
an increase for the first nine months
of 35% over the previous year’s
corresponding period.
World commodity
By the end of December 2006, total
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 ¢25,421.5 billion with the other
projections. significant revenues from grants
(¢7,228.6 billion) and loans
(¢5,759.3 billion).
The total payments for 2006 are
General progress projected at ¢41,357.2 billion. This
made towards is made up of statutory payments of
¢13,006.5 billion and discretionary
achieving
payments of ¢28,350.7 billion, both
convergence criteria. of which represent slight savings in
Appreciably, three out original annual budget estimates.
of five WAMZ
countries achieved
Monetary Policy
single digit inflation in
June 2006.
The policy implemented by the BoG
was targeted at inflation
management in the face of rising
crude oil prices on the world market.
PricewaterhouseCoopers Ghana Budget Highlights: The Economy
This resulted in the inflation rate
generally declining over the first
three quarters of 2006.
The year-on-year growth rate of
reserve money at the end of
September as compared to the
same period in 2005 reduced from
19.3% to 16.7%.
Fluctuations in the interest rate
were quite low. The BoG cut the
prime rate by 100 basis points at
the start of the year and money
market rates declined during most
of the year. However, Deposit
Money Banks (DMBs) did not
change their lending rates
significantly over the review period.
Credit growth has been strong to
date at 31.7%. Outstanding credit
(in real terms) increased by 17.4%,
with a greater proportion of this
growth channelled to the private
sector of which the services sub-
sector was the largest beneficiary.
Credit to GDP ratio was 20.9% as
against 18.6% for the same period
in 2005. As at the end of
September 2006, the private sector
share of credit was 81.6% as
against 77.4% for the same period
in 2005.
Depreciation of the cedi against the
country’s major trading partners
was well managed.
Balance of Payments (BOP)
Outlook for 2006
The overall balance of payments is
projected to be a surplus of
US$178.8 million by the end of the
year as compared to the surplus of
US$84.34 million in 2005. This
healthy surplus expectation is
fuelled by anticipation of higher
export receipts resulting from strong
commodity prices, and debt relief
under the MDRI.
Developments in the West Africa
Monetary Zone (WAMZ)
The countries in the WAMZ
generally made progress towards
achieving the convergence criteria
6
 The Economy
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.
PricewaterhouseCoopers
targets. The macroeconomic
environment was generally good in
the first part of 2006; modest growth
was recorded in all countries, with
reduced inflation and improved
external positions. Three out of the
five WAMZ countries (Gambia,
Guinea and Nigeria) achieved
single digit inflation in June 2006.
Major Socio-economic
Developments in 2006
The Electricity Power Sub-Sector
Crisis
Ghana suffered a serious setback in
its electricity sub-sector. Low water
levels in the Akosombo Dam and
high petroleum product prices
forced an extensive country-wide
load management programme, as
the VRA was unable to generate
adequate electricity for industrial
and domestic use.
With some improvement in rainfall
patterns, it is likely that water in the
Akosombo Dam will rise to 247 ft by
the end of 2006. However, the
expected 247 feet level, which falls
within the period of the dry season,
is critically low compared with the
mid-point operating level of 259
feet. This level will require VRA to
continue to manage electricity
supply from its Akosombo plant, at
least into the first half of 2007.
This situation has caused
Government to reconsider its
energy reform strategy to address
the current crisis and to prevent a
recurrence in the medium-to-long
term.
Deadlock on Public Wages and
Salaries
For the first three quarters of 2006,
wages and salaries amounted to
¢8,422.5 billion, higher than the
budgeted amount of ¢7,588 billion.
This is projected to hit ¢10,972.5
billion by the end of 2006, thereby
exceeding the budget of ¢9,999
billion. During the year there were a
significant number of labour issues
involving public sector workers.
Ghana Budget Highlights: The Economy
Medical doctors, nurses,
polytechnic teachers, members of
the Teachers and Education
Workers Union (TEWU), and
graduate teachers (NAGRAT)
engaged the government at various
times over the perceived
inadequate salary levels.
Overview of Macroeconomic
Framework for 2007
GPRS II will continue to provide the
guiding framework for 2007. Key
macro-economic targets set out in
the 2007 budget include:
 Real GDP growth of at least
6.5%;
 End of year inflation of between
7% and 9%;
 Average inflation rate of 8.8%;
 Accumulation of international
reserves to a target of at least 3
months of import cover;
 Domestic primary deficit of
0.6% of GDP; and
 An overall budget deficit of
3.2% of GDP.
To achieve the above targets, the
following policies will be applied:
 Prudent fiscal policy
management;
 A monetary policy that is flexible
enough to respond to external
shocks, promote growth and
ensure price stability;
 Real interest rates that enhance
effective mobilisation of savings
and make credits affordable to
the private sector; and
 Relatively stable real exchange
rates that promote international
trade.
7
 The Economy
The macroeconomic
environment appears
stable with GDP growth at
6.5%. However
international reserves,
domestic primary surplus
and overall budget deficits
are projected to deteriorate
over the previous year’s
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 to
equal 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.
PricewaterhouseCoopers
Furthermore, structural constraints
at the policy and institutional levels
that impede increased productivity,
adoption of technology and
competitiveness of the private
sector with respect to agriculture,
industry and service will be
addressed.
Resource Mobilisation
Total revenue collection for 2007 is
projected at ¢54,315.9 billion, of
which domestic revenue is
projected at ¢37,532.2 billion. The
tax revenue agencies are expected
to collect ¢32,533.1 billion, which is
equivalent to 23.6% of GDP. The
2007 tax revenue projection
represents a growth of 39.5% over
the projected outturn for 2006.
The government plans to derive its
revenues mainly from direct taxes,
import taxes, VAT, duties and loans.
To achieve the revenue
performance, it will be necessary to
enhance the capacities of the
revenue agencies to collect the
taxes and develop systems to
prevent revenue leakages. In
addition, project loans, which
account for a large portion of
government loans, will have to be
well negotiated to achieve best
economic cost.
Resource Allocation
Total payments are estimated at
¢54,315.9 billion, made up of
statutory payments of ¢14,818.1
billion and discretionary payments
of ¢39,497.8 billion.
Out of the discretionary payments
personnel emoluments are
estimated at ¢13,167 billion,
indicating a 20% increase over the
projected outturn for 2006 and
representing 33.3% of total
discretionary payments for 2007.
The level of personnel emoluments
also constitutes 41.5% of total
domestic revenue, and 9.6% of
nominal GDP.
Total investments (excluding those
financed by statutory funds) are
Ghana Budget Highlights: The Economy
also programmed to form about
29.3% of total discretionary
payments, 40.7% higher than the
2006 projected outturn.
The overall budget deficit is
expected to be 3.2% of GDP at the
end of 2007. The domestic primary
balance is targeted at 0.6% of GDP
and the domestic debt-to-GDP ratio
is projected to be 7.9%.
The drivers for these expectations
are commodity prices and crude oil
prices – cocoa and gold are both
expected to perform strongly on
world markets; oil prices are
expected to remain in excess of
US$50 per barrel.
Monetary Policy Outlook
The BoG is expected to continue to
implement a monetary policy aimed
at containing inflationary pressure
and reducing inflation to a single
digit by the end of the year. Broad
money is therefore projected at a
more restrained rate of 21.4%. A
more aggressive target of 22.6%
would be pursued for growth in
reserve money.
The External Sector and Balance
of Payments Outlook
The government envisages that
external financing requirements will
continue to be high. Merchandise
exports are still expected to drive
domestic growth and alleviate
poverty. The country’s oil bill is
expected to be US$1,618.2 million.
Merchandise exports are projected
to reach US$4,105.5 million.
Together with transfers, the current
account is expected to close in
deficit at US$619.7 million. An
expected net inflow from a mix of
debt, equity and other investments
will leave, the overall balance of
payments at a surplus of US$198
million.
Private Sector Competitiveness
In line with GPRS II, the private
sector is considered the key vehicle
for accelerated growth and
8
 The Economy
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 the
African Development Bank
to forgive a total of US$4
billion.
Millennium Challenge
Account (MCA) project
takes off in 2007.
PricewaterhouseCoopers
development. Government policies
and programmes will continue to
focus on the agriculture, industry
and services sectors to address
structural constraints that impede
increased productivity and
competitiveness of the private
sector.
Public Sector Salaries and Wages
A wage bill of ¢13.2 trillion,
representing 9.6% of GDP and
33.3% of total discretionary
expenditure is projected.
Phase 1 of the implementation of
the public sector pay reform has
resulted in the removal of distortions
in the GUSS. Phase II involving the
assessment of the job content and
the consequential placement of all
public sector employees will be
completed in 2007. A Fair Wages
Commission is to be established to
administer a new comprehensive
pay structure.
Multilateral Debt Relief Initiative
A total of US$4 billion is expected
as a debt relief package in respect
of outstanding obligations to the
International Monetary Fund (IMF),
the World Bank and the African
Development Fund over 50 years.
The objective is to augment the
current level of public investment to
accelerate the achievement of the
Millennium Development Goals
(MDGs) and GPRS targets.
For 2007, with expected inflows
from MDRI of ¢1,598.65 billion and
HIPC debt relief of ¢2,210.83 billion,
planned total poverty reduction
expenditure will go up to ¢12,926.83
billion representing 32.7 per cent of
the total government expenditure.
The Power Sector
The government plans to increase
generation capacity through various
measures. Additional power supply
generated upon implementing these
measures is expected to be
1,141MW.
Ghana Budget Highlights: The Economy
These measures include
collaboration between the VRA and
the mines, the relocation of the
Osagyefo barge to Tema, and the
procurement of a new plant to
generate some 125MW of thermal
energy. In the long-term the Bui
Dam is expected to augment
enhanced generating capacity.
All the funds for MDRI for 2007
have been voted for the energy
sector to support the funding of the
proposed short-term solution to the
energy crisis. The MDRI total of
¢1,598.65 billion has been allocated
entirely to the VRA to be used to
fund the procurement of gas
turbines and a barge.
A Summary of Sectoral Growth
Prospects
The agricultural, industrial and
service sectors are expected to
grow at 6.1%, 7.7% and 6.7%,
respectively. Highlights of key
programmes driving these growth
rates include:
 Under the Food Crop
Development Project (FCDP),
1,500 eligible farmers will be
given credit support totalling
¢5.3 billion (US$584,000);
 The Livelihood Empowerment
against Poverty (LEAP) pilot
social grants scheme will be
developed in 2007 with support
from the HIPC fund;
 The first phase of the
Millennium Challenge Account
(MCA) project takes off in 2007
with estimated expenditure of
US$74.8 million;
 The government is to support at
least 5 large and 10 medium
and small scale salt producers
to expand production in the
coastal basins of Western,
Central, Greater Accra, and
Volta Regions;
 20,000 hectares of oil palm will
be planted and one specialized
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
10% of the person’s total cash
emoluments;
 Accommodation only – the
calculation of the benefit has
been reduced from 10% to
7.5% of the person’s total cash
emoluments; and
 Shared accommodation – the
calculation of the benefit has
been reduced from 5% to 2.5%
of the person’s total cash
emoluments.
Vehicles
Tax reliefs for  Vehicle with fuel – the
individuals calculation of the benefit has
been reduced from 15% to 10%
increased
of total cash emoluments; in
addition, the maximum amount
that can be included as a
benefit has been increased
No change in from ¢300,000 to ¢3,000,000;
personal income
tax rates  Vehicle only – the calculation of
the benefit has been reduced
from 7.5% to 5% of total cash
emoluments; in addition, the
maximum amount that can be
included as a benefit has been
increased from ¢150,000 to
¢1,500,000;
 Fuel only – the calculation of
the benefit has been reduced
from 7.5% to 5% of total cash
emoluments; in addition, the
Benefits in kind
maximum amount that can be
calculations for included as a benefit has been
individuals on increased from ¢150,000 to
accommodation ¢1,500,000; and
and vehicles are
adjusted  Driver, vehicle with fuel – this
new category has been added
and the calculation of the
benefit is 12.5% of total cash
emoluments; the maximum
amount that can be included as
a benefit is ¢3,500,000.
Whilst these benefits may reduce the
tax burden on some individuals who
have accommodation provided by the
company, they will not benefit all
workers and an adjustment to the
PricewaterhouseCoopers Ghana Budget Highlights: Direct Taxation
personal income tax rates or the
widening and increasing of the bands
would have been more appreciated.
Furthermore although the
percentages have decreased in
calculating the tax benefits on
vehicles because the maximum
benefits has not been raised ten
times the previous amount, in most
instances this will result in greater
taxes for individuals with employer
provided vehicle or fuels.
Tax Reliefs for Individuals
The government announced that in
line with its objective of increasing
disposable income of taxpayers, the
following increases in tax reliefs are
proposed:
 Marriage/Personal relief –
raised from ¢300,000 to
¢350,000 per annum;
 Old Age relief – raised from
¢300,000 to ¢350,000 per
annum;
 Children’s Education/Child relief
– raised from ¢240,000 to
¢300,000 per annum;
 Aged Dependent relief – raised
from ¢200,000 to ¢250,000 per
annum; and
 Cost of Training relief – raised
from ¢200,000 to ¢1,000,000
per annum.
Whilst these increases are welcome
news for taxpayers, the government’s
objective of increasing disposable
incomes of taxpayers would have
been better accomplished by
broadening the bands and/or
reducing pay as you earn (PAYE) tax
rates.
Venture Capital Tax Incentives
The government-sponsored Venture
Capital Trust Fund has signed two
investment agreements with venture
capital finance companies; however,
12
 Direct Taxation
the government would like to see
more venture capital finance
companies involved in the scheme.
Venture capital tax
In this regard the following
incentives
enhancements to the program have
increased been announced:
 Full tax exemption from
corporate income tax, dividend
tax and capital gains tax has
been extended from five years
to ten years;
 Losses from disposal of the
shares may be carried forward
for up to five years after
disposal (whereas previously
Tax Arbitration the five year carry-forward was
Board established only available up to five years
after the tax exempt period
expired);
 Distributions of interest,
dividends and capital gains to
investors in venture capital
finance companies shall be tax
exempt; and
 The 100% chargeable income
deduction granted to financial
institutions investing in venture
capital finance companies is
now extended to include all
corporate and individual
investors who invest in venture
capital finance companies.
This is a positive step in the
continued support of the venture
capital industry in Ghana.
Land registration
Title Registration on Land
initiatives put in
place
As part of the government’s initiatives
to encourage land registration and
investment, the following proposed
changes have been recommended:
Strategy to
broaden tax net  First, the government will waive
any interest on arrears of rent
owed to the government by
lessees for 2007; and
 Secondly, to encourage title
registration, fees on land
registration will no longer be
PricewaterhouseCoopers Ghana Budget Highlights: Direct Taxation
based on land value but will be
based on flat rates, as follows:
 Up to 1 acre - ¢350,000;
 1 acre to 100 acres -
¢500,000;
 Above 100 acres - ¢10,000
for each additional acre;
 Mortgages - ¢350,000; and
 Discharge - ¢100,000.
These new initiatives may encourage
land registration.
Establishment of Tax Arbitration
Board (TAB)
To enhance transparency in tax
administration and expedite the
resolution of appeals, the
government is proposing the
establishment of a TAB.
The TAB will decide on appeals
against the decisions of the Revenue
Commissioners. The Revenue
Agencies Governing Board will
facilitate the setting-up of the TAB.
Any agencies that are put in place to
facilitate disputes taxpayers may
have with the authorities must be
applauded and hopefully the TAB will
be as efficient in resolving issues as
the Fast Track High Courts.
Broadening the Income Tax Base
The government has indicated that a
significant percentage of vehicle
registrations is done by the informal
sector operators, most of whom are
not taxpayers.
Any additional measures that will
broaden the tax net to bring in more
taxpayers should be supported and
hopefully, this will result in less tax
burden on those currently bearing the
tax costs of non-paying taxpayers.
13
 Direct Taxation
More Double Tax Treaties to be
concluded
DTTs with Sweden and Switzerland
have been initiated and should be
completed in 2006.
DTTs are also being pursued with
Syria, the Netherlands and the Czech
Republic.
The pursuit of additional DTTs is truly
a positive decision and should make
Additional Double
Ghana more competitive in attracting
Tax Treaties being
investors from these countries.
negotiated
However, it is also important to
ensure that once signed, DTTs are
properly and timeously implemented.
Comments
The government stated that it is
determined to promote the practice of
efficient taxation and enhance
confidence in the tax system.
In addition, the government restated
its commitment to introducing
measures that seek to remove the
bottlenecks that impede revenue
generation and collection.
Whilst some of the concerns of some
industries have been addressed, the
concerns of many others have not
been considered.
For example:
 The non-availability of loss
carry-forwards to all companies;
 Withholding tax rates on local
goods and services have not
been reduced to reflect current
income tax rates;
 Additional bureaucracy
introduced that requires the
taxpayer to receive a VAT
clearance certificate at a time
PricewaterhouseCoopers Ghana Budget Highlights: Direct Taxation
when it is already burdensome
to receive an income tax
clearance certificate;
 The need for personal tax rates
to be reduced or the bands
widened to put more disposable
income into taxpayers’ pockets
in line with the new fair wage
policy;
 The absence of adequate
definitions and terminology
under the Tax Code to reduce
misunderstandings between the
taxpayers and the tax
authorities;
 The need for the government to
implement a computerised
system that allows the sharing
of information between the
various agencies to reduce
delays and errors in information
provided to taxpayers;
 Ensuring the timely issuing of
Tax Clearance Certificates and
WHT certificates;
 Allowing exporters to issue VAT
Relief Purchase Orders on their
main taxable inputs;
 Introduce a mechanism to allow
the offset of taxes refundable
against other forms of taxes
payable; and
 Banks subjected to the same
bad debts provisioning
requirements as other
companies when their business
is inherently different to other
companies.
It is expected that the government
would relentlessly work towards
resolving these concerns of
taxpayers to improve its relationship
with taxpayers.
14
 Direct Taxation
2007 Budget Highlights*
*connectedthinking
Value Added Tax
Possible administrative burden for businesses due to the
introduction of VAT Clearance Certificates
Overview
Overall, there were no major changes
to VAT; although certain incentives
were introduced to encourage the
pharmaceutical industry. The key
changes are summarised below:
VAT Clearance Certificate
In order to assist the VAT Service in
achieving its target of 100%
compliance, VAT clearance
certificates (VCC) will be issued to
businesses in good standing. These
certificates will be issued upon
VAT Clearance
application from the first quarter of
Certificate introduced 2007. The VCC will have a six-month
validity period and will be necessary
for competitive tendering and clearing
goods from the ports, for example.
The introduction of the VAT
clearance certificate may increase
the administrative burden of
taxpayers and may, for example,
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
VAT process may suffer a set-back
as a result of the introduction of the
VCC.
VAT Exemptions to
VAT exemptions on Pharmaceutical Industry
certain
pharmaceutical raw
materials In order to encourage local
pharmaceutical industries to increase
production of locally manufactured
PricewaterhouseCoopers Ghana Budget Highlights: Value Added Tax
drugs, VAT is to be eliminated on raw
materials and packaging materials
used in the manufacturing of drugs
for the treatment of HIV/AIDS,
malaria and tuberculosis.
All other locally produced
pharmaceutical products will be zero-
rated.
This measure is expected to make
locally produced pharmaceuticals for
these selected illnesses competitive
against their imported substitutes.
It is hoped that, no problems will arise
from what are and what are not raw
materials used in the drugs referred
to.
With regards to the drugs associated
with HIV/AIDS, malaria, and
tuberculosis, the manufacturers
would be more pleased to see these
as zero-stated opposed to exempt as
this would allow them to claim input
credits.
Standard VAT Rate
This year is to see the
implementation of the flat rate
scheme of 3%. This initiative is
targeted at the informal sector and
the rate would be applied to the
taxable persons without recourse to
input VAT claims.
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
Credit will be disbursed to farmer
groups for production, storage,
processing and marketing.
The Food Crop Development Project
(FCDP) will make credit available to
1,500 eligible farmers.
Cocoa Industry
 In the 2006/07 Crop Season
cocoa output is projected at
600,000 metric tonnes;
The government
has put in place
 Producer Price of ¢9,150,000 per
measures to boost metric tonne is set for the
the cocoa industry 2006/07 cocoa season. The new
price for a bag of 64 kg is now
¢571,875 as against a previous
price of ¢562,500; and
 Government has supported
The MLFM will Ghana COCOBOD to secure a
initiate key policy pre-export trade finance facility of
measures to US$810 million from external
improve forestry and financial institutions. The facility,
allows COCOBOD to withdraw an
wildlife contribution
additional US$70 million to
to national wealth
finance the 2007 Light Crop
purchases.
Lands Sector
.
Activities of the Land Administration
Project will be strengthened.
Activities will include:
The drafting of new legislation for
land administration and institutional
reform will be completed and laid
before 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 will
continue in the 3 northern
regions;
PricewaterhouseCoopers Ghana Budget Highlights: Sectoral Outlook
 Computerisation of the existing
land sector agencies will
continue;
 Human resource capacity
development will be undertaken
to train the staff of the land sector
agencies; and
 Collaboration will take place with
the Millennium Development
Authority to establish land title
registration services.
The Land Valuation Board (LVB), in
partnership with Private Sector
Valuers, will carry out the revaluation
of properties within the Accra
Metropolitan Assembly area.
Forestry Sector
The Ministry of Lands, Forestry and
Mines (MLFM) will undertake the
following:
 260 timber leases will be
converted to Timber Utilisation
Contracts. Conversions are
expected to increase revenue
generation; and
 Wildlife institutional capacity will
be built to enhance management
of competitive and transparent
international tendering in respect
of the commercialisation of
wildlife related infrastructure.
Mines Sector
The MLFM will continue to regulate
the use and handling of explosives
through the issuance of permits and
directing the manner in which
explosives should be stored and
disposed of.
The MLFM will continue with
exploration and geological mapping
of targeted areas to generate
geological information for appropriate
policy decision making and for
dissemination to the general public,
especially investors.
19
 Sectoral Outlook
The MLFM will continue to assist
small scale mining cooperatives.
Energy Sector
A number of initiatives will be enacted
The energy sector
to address the energy sector
challenges
challenges and to ensure continuous
supply of reliable energy:
 The medium term strategic goal
Liberalisation of the for the Power Sub-sector is to
Petroleum Sector to
restore the power generating
speed up private capacity of the country and also
sector investment. to upgrade the infrastructure in
order to improve the reliability of
power supply; and
 The Volta River Authority (VRA),
Establishment of in collaboration with the Ministry
cold chain facility of Energy (MOE) has concluded
from farm gate to arrangements to procure an 80
market centres MW power plant which will be
operational by April 2007.
Under the Self Help Electrification
Project (SHEP)-4 Programme, over
200 communities will be connected to
the national grid in 2007.
The full unbundling of VRA will be
completed in 2007 with the
establishment of a separate
Electricity Transmission Utility (ETU).
The MOE will continue to promote
and install solar powered systems in
selected institutional facilities under
the Ghana/Spanish Loan protocol.
The MOE will initiate practical
regulatory measures to speed up
development of renewable energy
technologies, particularly wind, solar
and waste-to-power.
Petroleum Sector
The medium term strategic goal is to
fully implement the liberalisation of
the downstream sector, speed up
private sector investment and
manage the impact of rising crude oil
and petroleum product prices on the
national economy. Within the context
of the liberalisation, the private sector
PricewaterhouseCoopers Ghana Budget Highlights: Sectoral Outlook
will be allowed to import crude oil for
refining.
Much as the liberalisation of the
downward stream sector would in no
doubt help in the development of the
economy there should be control
measures to prevent the adulteration
of fuel in the refinery process.
The government will continue to
encourage investment in the search
for Ghana’s hydrocarbon resources.
The search in deep waters will be
boosted and exploration in the Voltain
Basin is expected to commence in
2007.
To facilitate the development of
renewable energy resources, a
Renewable Energy Law will be
enacted to provide the legal
framework for accelerating the
development of renewable energy in
the country.
Ministry of Trade, Industry, PSD
and Presidential Special Initiative
(MOTI, PSD & PSI)
The MOTI policy direction for 2007
will be to develop a vibrant,
technology-driven, competitive
industrial sector that significantly
contributes to economic growth and
employment creation. This will
involve mass mobilisation of the rural
communities and other vulnerable
groups, including women.
The MOTI will facilitate the
establishment of a cold chain facility
from the farm gate to export market
centres as well as reducing clearance
time.
The National Industrial Policy, which
will focus on strategic sectors to drive
the continuing industrialisation
process, will be completed.
Tourism
To accelerate community-based
tourism and integrated development,
the Ministry of Tourism and Diasporan
Relations (MOTDR) intends
20
Sectoral Outlook
organising five major international
fairs and exhibitions to promote
Ghana as a tourism destination:
Development of
sports facilities to  A week long Paragliding Festival
to boost both domestic and
meet international
international tourism at Atibie
standards
during the Easter celebration;
 Emancipation and Panafest
celebrations scheduled from 21
July 2007 to 5 August 2007;
 Launch of the “Akwaaba -
Anyemi’’ programmes, dubbed
the “Joseph Project”, aimed at
attracting Ghanaians back to
Ghana;
 National Chocolate Day to
coincide with Valentine’s Day on
14 February; and
 Tours to Tetteh Quarshie Cocoa
Farm at Mampong and other
cocoa growing areas.
ICT Sector
To create an effective ICT
environment, the Ministry of
Four new ICT bills to Communication will submit four bills,
be presented to the Electronic Transaction Bill, the
parliament. Telecommunications Bill, the National
Communications Authority (NCA) Bill
and the National Information
Technology Agency Bill through
Cabinet to Parliament for approval in
2007.
Educational Sector
Basic Education
The drive towards the attainment of
Universal Primary Completion by
2015 and Gender Parity by 2008 will
be given additional impetus.
The Capitation Grant Scheme to
increase access to basic education
will be sustained and government will
also continue to subsidise the
examination fees of the BECE.
PricewaterhouseCoopers Ghana Budget Highlights: Sectoral Outlook
Sports
In 2007, various preparatory activities
including work on construction of
Sekondi and Tamale stadia as well
as the rehabilitation of the Ohene
Djan Stadium, Accra El Wak
Stadium, Accra and Baba Yara
Stadium, Kumasi will be completed.
In addition, 20 community parks will
also be upgraded.
Preparations towards the CAN 2008
will certainly result in the
development of sports facilities in line
with international standards. This is
expected to market Ghana to the
world during the CAN 2008 sporting
events.
Health Sector
In 2007 the health sector will begin
the implementation of the new health
policy focusing on achieving three
inter-related and mutually reinforcing
objectives:
 Ensuring that children survive
and grow to become healthy and
productive adults that reproduce
without risk of injuries or death;
 Reducing the excess risk and
burden of morbidity, disability,
and mortality, especially in the
poor and marginalized groups;
and
 Reducing inequalities in access
to health, population and nutrition
services.
National Health Insurance Scheme
The Ministry of Health (MOH)
together with its collaborative
agencies will sustain the NHIS and
expand its coverage nationwide to
about 55 per cent of the population.
Divestiture Implementation
Committee (DIC)
In 2007, the DIC will continue to
focus on off-loading government
21
Sectoral Outlook
shares in existing companies through
the Ghana Stock Exchange. This will
Private sector ensure public participation in the
enterprises remain ownership of divested State Owned
imperative to Enterprises (SOEs) and improve
national revenue flow to the government.
development, self
dependency and The continued divestment of SOEs
poverty reduction. supports governments’ assertion that
the private sector is the engine of
growth. This exercise is expected to
revamp very important businesses
that have gone down, and also create
more employment opportunities.
The Ghana Investment Promotion
Centre (GIPC)
GIPC will continue to create and
facilitate the atmosphere for domestic
and foreign investment in various
sectors of the economy (with the
exception of mining and petroleum).
In 2007, the GIPC will continue to
implement its corporate plan in
Investment drive for conjunction with relevant government
accelerated agencies whose activities have a
development and direct bearing on GIPC. Key areas of
job creation implementation will be to improve the
enabling environment, investor
facilitation and servicing, investor
promotion and generation, review of
the restructured one-stop-shop for
impact and institutional development.
In this golden age of business, there
is the need to make the GIPC’s one-
stop-shop concept a reality. This will
facilitate doing business in Ghana
and thus project the country as the
preferred investor destination.
Micro-financing and small loans
Government continues to pursue its
policy of supporting the development
and growth of a sustainable micro
financing system under GPRS II as a
means of reaching the productive
poor of society with credit and other
financial services. Some steps have
been taken to strengthen the micro
credit and small loans scheme.
It is expected in 2007 that 110,000
micro and 22,000 small scale
PricewaterhouseCoopers Ghana Budget Highlights: Sectoral Outlook
borrowers will be assisted with
credits.
Public Procurement Board
The board will undertake the
following activities:
 Assessment of 200 entities to
determine their level of
compliance with the Public
Procurement Act;
 Development and organisation of
training for 500 procurement
entities;
 Implementation of the Web-
based procurement planning
software;
 Completion of the development of
software for procurement
planning, recording and
management, and roll out to all
MDA’s and MMDA’s; and
 Further consultations with
stakeholders on the Domestic
Content Bill which offers
incentives to firms operating in
Ghana to use a specific
percentage of their inputs from
domestic sources.
Non-Tax Revenue Mobilisation
To improve non-tax revenue
collection, the Ministry of Finance and
Economic Planning (MOFEP) will
implement the following measures:
 Work with Bank of Ghana and
Commercial Banks to introduce
on-site banking, and where
possible to facilitate the collection
of non-tax revenue and internally
generated funds (IGFs) at MDA
premises;
 Work with the IAA to carry out
auditing of (IGF’s) of selected
MDA’s and MMDAs and District
Assemblies in order to strengthen
their collection mechanisms,
22
Sectoral Outlook
improve internal controls and
reduce revenue leakages;
 Collaborate with the Ministry of
Local Government and Rural
Development to implement
agreed measures to improve the
capacity of MMDA’s to generate
revenue; and
 Facilitate the review of obsolete
and unrealistic fees and charges
by MDAs.
Internal Revenue Service (IRS)
The IRS will undertake the following
activities:
 Establish 5 per cent withholding
tax monitoring units to draw deal
with non-compliant taxpayers to
Internal Revenue
help maximize collection;
Service (IRS) to
run a database of
its operations.  Intensify tax education,
enforcement and audit;
 Re-launch the tax stamp and
establish the Small Taxpayers
Bureau to administer the rent tax
and tax stamps; and
VAT services to
enhance the use  Commence full computerisation
of Cash Registers of its operations.
Customs Excise and Preventive
Service
CEPS will undertake the following
activities:
 Enhance the performance of
personnel through Capacity
Building programmes;
 Commence electronic
transmission of permits, licenses
and other authorization to CEPS
(GCMS) via GCNet;
 The GCNet Unit in the Research
Division will be made fully
operational to capture taxpayers
PricewaterhouseCoopers Ghana Budget Highlights: Sectoral Outlook
who prepare fictitious accounts;
and
 As part of CEPS’ programme to
deepen automation of the
processes and procedures, all
MDAs whose license, permit or
any other form of authorization or
approval (including those for
exemptions) is required in the
import/export trade, shall be
required to be connected to the
GCNet not later than 1 April
2007.
This measure will not only facilitate
clearance of goods but also eliminate
fraudulent practices by both traders
and officials in the procurement and
utilization of such facilities.
VAT
Registration and Enforcement
Physical surveillance of VAT
registered businesses will be stepped
up to complement the invoice
invigilation and improve compliance.
Use of Cash Registers
In 2003 VAT and import duty on cash
registers were removed to enable
small and medium size enterprises
(SMEs) dealing in high volume low
value goods acquire them. The
objective was to improve their record
keeping and financial management
capabilities. In year 2007 the VAT
Service will capitalise on this initiative
by further enhancing existing retail
schemes and own-invoice
dispensations to ensure that full
advantage is taken of the control
mechanisms inherent in these
technologies to boost compliance by
SMEs with the requirements of the
VAT law and thereby enhance VAT
revenue.
Ministry of Public Sector Reform
The Ministry of Public Sector Reform
will continue its activities in close
collaboration with implementing
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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