Ghana Raises Income Taxes to Maintain Budget-Deficit Target

ACCRA (Capital Markets in Africa) – Ghana plans to increase taxes for the highest earners as the West African nation seeks to boost weak collections which are putting its budget-deficit target at risk.

Presenting a review of the 2018 budget in parliament on Thursday, Finance Minister Ken Ofori-Atta said the tax band for individuals earning more than 10,000 cedis ($2,089) per month will be raised to 35 percent, from the current top rate of 25 percent. Ghana collected 1.4 billion cedis less than what it targeted in the first five months of the year, almost double the 797 million cedis in expenses that it cut, he said.

The tax increase and other proposals to improve compliance will yield 1.3 billion cedis in 2018 and enable the government to meet its budget-shortfall target of 4.5 percent of gross domestic product for the year, from 6.3 percent in 2017, he said. Without the new measures to raise revenue, the budget deficit would’ve been 4.9 percent of GDP, he said.

“What is clear is that we’re not collecting as much as we should,” Ofori-Atta told lawmakers in the capital, Accra. “The solution to this problem is to ensure compliance to existing tax laws, plug leakages in the system, ensure value for money for the expenditures that government undertakes and ensure, Mr. Speaker, that the wealthy also pay their fair share.”

Bailout Program
The yield on Ghana’s dollar bonds maturing in 2023 decreased 6 basis points to 6.556 at 2:26 p.m. in Accra, the lowest since May 31.

Ghana is in the final year of an almost $1-billion bailout program under the International Monetary Fund which it entered in 2015 when debt ballooned and its currency collapsed. The Washington-based lender said in March that Ghana should increase tax collections as spending on fixed investments, such as infrastructure