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Commentary

Commentary“Stimulating Growth for Develo

The 2011 Budget Statement was oneof the most anticipated in the recenthistory of this country, not onlybecause of the general public’sexpectation of the oil revenue and theperceived unlimited benefits thereof,but also the impact of Ghana’s recentreclassification to middle incomestatus. We are pleased that in theBudget Statement, the Minister hasindicated clearly the need to managethe expectations of the general publicwith regards to the contribution of oilrevenue to the national budget,especially, in the first year of fullproduction.

Government has spent another yearstabilising the macroeconomicenvironment. This is evidenced by thefall in interest rates, the stabilisationof the Ghana Cedi, an increase ingross foreign reserves and a singledigit inflation figure of 9.38% as at theend of October 2010. These gainsappear to have been accomplished atthe expense of real Gross DomesticProduct (GDP) growth, which isprojected at 5.9% for 2010. This isbelow the target of 6.5% and stillmuch lower than the 2008 actual of7.27%.

While the proposed initiatives in theBudget Statement are aimed atstimulating growth, the 2011 GDPgrowth rate target of 12.3% (includingoil) seems ambitious. Consideringthat activities in the oil and gas sectorwill only just be starting in 2011 andwill reach its peak in subsequentyears, expecting 5% GDP growthfrom that sector alone seems ratherhigh. In addition, theclarifying/enabling legislation affectingthe exploration and production,revenue management and localcontent is yet to be enacted

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The 2011 BudgetStatement andEconomic Policy wasdelivered toParliament onThursday, 18November 2010 byDr Kwabena Duffuor,Minister of Financeand EconomicPlanning

We outline in thispublication some ofthe principal matters inthe Budget Statement

In this Issue:

Commentary

Overall Summary

The Economy

Direct Taxationand VAT

Customs & Excise

Sectoral Outlook

Glossary

We will point out thatin prior years, changeshave often been madeto the proposals in theBudget Statementbefore the relevantbills have beenpublished and enacted

2011 Budget Highlights

pment and Job Creation”

o allow for a consistent andredictable framework for industryarticipants.

he GDP growth rate target of 12.3%or 2011 is expected to be achievedn the back of three main sectors:anufacturing; services; and oil and

as. It is interesting to note that withhe rebasing of the GDP calculations,he agricultural sector has lost theead position as the most significantontributor to GDP and is noweplaced by the services sector. It iseassuring to note that there are stillignificant initiatives to develop thegricultural sector, where we believehere is great potential for growth.ncouraging private participation ingro-processing as well as significant

mplementation of the Budgettatement proposals for mechanised

arming will impact positively on theector.

he manufacturing sector continueso face challenges. Local

anufacturers still suffer from highost of inputs that make theirroducts uncompetitive againstheaper imports. Unreliable supply ofower and water, and the recent

ncreases in utility prices had adverseffects on their operations. The

mpact on their cost base andherefore their profitability resulted inome companies implementingrastic cost reduction measureshich included cutting back onroduction and/or laying off staff. The

ong-term effects of such adversehanges in the business environmentould be loss of tax revenue, growingnemployment and Ghana becomingncompetitive as a business location.

Commentary

Government’s projections for 2011assume that the services sector’srecent growth rate will be sustained.

It was expected that there would besome policy initiatives to further boostthe services sector or at least helpsustain the growth attained so far.Although the Budget Statement doesnot contain any such specificinitiatives, hopefully, the passing ofthe Petroleum Bill and other relatedlegislation and the inclusion of localcontent in the operations of the oiland gas sector will provide the basisfor sustained growth in the servicessector.

Tax and other revenue mobilisationcontinue to be a challenge. TheBudget Statement therefore seems tobe dominated by tax initiatives both atthe corporate and personal levels. Itis good to note that efforts to plug therevenue leakages will becomplemented by continuing effortsat broadening the tax base. Reformsin the administration of taxes thatbegan in 2010 are expected tocontinue through 2011. Significant isthe initiative to consolidate theprocess of granting of exemptionsand concessions under the GhanaRevenue Authority (GRA). We hopehowever that this will not create abottle-neck in the processing ofapplications, which risks impeding theefficient conduct of business.

The Single Spine Salary Structure(SSSS) for the public sector is alaudable initiative. It should enableGovernment attract the right calibre ofstaff by reducing the disparitybetween public sector and privatesector salary levels. However, onekey issue that is yet to be adequatelyaddressed within the public service isproductivity. Considering that thewage bill required to implement thescheme requires the mobilisation ofadditional funds through the variousproposed tax initiatives, theGovernment must ensure that it getsvalue for money. It is imperative thatamong others as proposed, payrollaudits are intensified to eliminate‘ghost’ names on the payroll andperformance management-relatedreforms take place to ensure

remuneration is tied to productivity.We are pleased that these have beenidentified as key initiatives for 2011.

The potential for job creation ishugely dependent on the speedyimplementation of Government’spolicies that provide an enablingenvironment for growth of the privatesector. It will therefore be in theinterest of all for the private sector toundergo significant acceleratedgrowth to be able to provideadditional employment opportunities.Government therefore has to providethe platform for continuous dialogueand speedy resolution of concernsraised by the private sector as thecountry’s industrial base grows.

The continuation of initiatives on PPPis very welcome. We expect that theframework policy document that hasbeen submitted to cabinet will provideclear directions on how the privatesector can expect to collaborate withGovernment to undertake majorprojects, in particular the largeinfrastructure projects in the energy,transportation and communicationssectors that will facilitate furthereconomic growth. It will also be goodif Government can expedite action onthe improvement of those processesthat impact on the setting up,licensing, registration – businessesand property (especially land),payment and refund of taxes andaccess to credit, all of which areissues of interest to the private sectoras it seeks to become morecompetitive and contribute moreeffectively to economic development.

Corporate Ghana is particularlypleased to see the adoption of someof their recommendations including:

Consideration of the promptissuance of VAT refunds;

Review of the mining list;

Consultation prior to the passingof new tax legislation (this couldstill be improved);

Increase in the withholding taxthreshold; and

Commentary

Review of personal tax reliefs.

However, the Budget Statement issilent on a number of other proposalsthat Corporate Ghana hoped to seeaddressed. These include: Standardisation of practices

across various GRA offices, nowthat the GRA is in operation;

Computerisation of Tax CreditCertificate issuance process toreduce the administrative burdenby issuance of referencenumbers thus eliminating theneed for physical certificates;

Consolidation of the tax laws intoone Revenue Act;

Clarity on the specific timeframefor raising of assessments, aftersubmission of tax returns;

Increase in motor vehiclerestriction for capital allowancesto GH¢50,000; and

Timely response on contentiousmatters upon application/requestto the GRA.

Overall, we believe that the 2011Budget Statement is cautiouslyoptimistic in its outlook. After a two-year period of stabilisation that haslargely achieved the desiredmacroeconomic results, many in thecorporate sector are looking forwardto bolder growth initiatives. Even as itcontinues to maintain prudenteconomic management, weencourage Government to fullyimplement those bold initiatives,particularly in the area ofinfrastructure development,enhancing the private sector andpublic financial management that willdrive our economy further forward.

PricewaterhouseCoopers Ghana Budget Highlights: Overall Summary 4

Overall Summary

The Economy

This is the third Budget statement ofthe National Democratic Congress(NDC) Government in pursuit of its “ABetter Ghana” agenda. The 2010Budget was targeted at growth andeconomic stability.

2010 performance

Target2010

Actualprojected toend of 2010

Real GDP 6.5% 5.9%

12 monthCPI inflation(average)

10.5% 8.8%

End of periodinflation

9.2% 9.2%

Grossinternationalreserves

More than2.5monthsimportcover

More than 3months importcover

Overallbudget deficit

7.5% ofGDP

9.7% of GDP

Sectoral outturns for 2010

Target2010

Outturn % ofGDP

Agriculture 4.8 6.0 32.4

Services 6.1 6.9 32.8

Industry 7.0 6.6 25.7

In the 2011 Budget, Governmenttherefore intends to set thecountry’s economy on the path toaccelerated growth, hence thetheme: “Stimulating growth fordevelopment and job creation”

The implementation framework forthe envisioned accelerated growthis the medium term developmentframework, named the “GhanaShared Growth and DevelopmentAgenda” (GSGDA) framework 2010– 2013. Government intends tomodernise the revenue agencies,properly utilise revenue from oil andgas, ensure expeditious use of aidinflows, achieve effective budgetmanagement, implement the GhanaIntegrated Financial ManagementInformation System (GIFMIS) aswell as develop internal debt marketfor financing public investmentprojects.

Through these interventionsGovernment hopes to achieve thefiscal policy objectives of:

Improved financial resourcemobilisation;

Improved public expendituremanagement;

Reinforce expenditure controlsystems;

Efficient service delivery; and

Managing external shocks tothe economy.


Overall Summary2011 Budget: Development and job creation


Overall Summary

2011 fiscal year objectives

The 2011 Budget aims to enhancethe gains made in restoring fiscaland macroeconomic stabilityachieved in 2010.

The fiscal objectives for the 2011Budget are:

Real GDP growth (excluding oil)7%;

Real GDP growth (including oil)12.3%;

Average inflation of 8.8%;

End of period inflation of 8.5%;

Gross international reserves ofnot less than 3 months cover forgoods and services; and

Overall budget deficit of 7.5%GDP.

Government considers fair andequitable income distribution as akey component of its acceleratedgrowth agenda. Governmentintends to take steps to enhance itsrevenue generation activities andeffectively manage the oil and gasrevenue.

Key steps identified in this respectinclude:

passing the PetroleumExploration and Production Bill;

passing the Petroleum RevenueManagement Bill; and

Establishment of the PetroleumCommission.

The expected oil and gas revenueand related inflows and the recentrebasing of the national economywhich placed Ghana in the middleincome bracket has givenGovernment a lot of confidence inachieving the Better Ghana agenda.

Direct Taxation and VAT

There are a number of new taxinitiatives in the 2011 Budget whichare aimed at raising additionalrevenue and widening the tax net.

These include strengthening theadministrative framework for taxingself-employed professionals and theincome from commercial activitiesof hitherto exempt organisations.There are also initiatives tostreamline the process of grantingexemptions and concessions byincorporating it within the broaderadministrative ambit of the GRA.The five year tax exemption grantedto the real estate industry has alsobeen waived except for companiesthat partner Government inproviding affordable housing. Forthe second year in a row,Government has adjusted thepersonal income tax thresholds andin addition increased the quantumof personal reliefs.

The threshold for VAT registrationhas been increased to GH¢90,000.This is applicable to all supplierssubject to VAT. A new scheme willbe introduced for companies fallingbelow the threshold. The deferredpayment scheme for VAT has beenabolished and, effort will be made toensure timely refunds of VAT.

It is proposed that theCommunication Service Tax (CST)should apply to all companies in thecommunication industry.

Customs and Excise

The theme of revenue maximisationruns through the proposals oncustoms and excise duty. Keyamong them are the 20% increasein environmental tax on plasticpackaging materials, restriction inthe use of bonded warehouses anda tariff of 35% on imported rice andpoultry. There are also increasesproposed on airport taxes and theTema Oil Refinery (TOR) DebtRecovery Levy. There is however aproposed 2.5% reduction in the ad-valorem rate and exemption oftaxes on energy saving lamps.


Overall Summary

Sectoral Outlook

Government has identified thefollowing ten sectors as crucial toachieving the objectives of the 2011Budget.

Ministry of Food and Agriculture

Government’s main objective is toincrease food production andenhance food security in 2011. Toachieve these objectives,interventions include an increase infood storage capacity to at least100,000 metric tonnes, agriculturalmechanisation through theestablishment of AgriculturalMechanisation and Service Centresin the remaining 86 Districts. Inaddition, Government willencourage youth in agriculture, andundertake an inland valley ricedevelopment project.

Government plans to establish anExport Development andAgricultural Investment Fund tofinance agriculture.

Ministry of Lands and NaturalResources

Government will continue with itscore objective of ensuring land andsustainable natural resourcemanagement for accelerated wealthcreation. The key activities for 2011are to carry on with thecomputerisation of the variousdivisions of the Lands Commissionand development of an integratedLand Information System. Inaddition, the National ForestPlantation DevelopmentProgramme will be expanded in alldistricts.

Furthermore, Government willstrengthen the mining sub-sector byimproving support to small scalemining, the availability ofinformation and the licensingprocesses to attract mininginvestors and reduce social conflictsin mining communities.

Ministry of Trade and Industry

A new industrial policy focusing onindustrial production anddistribution, technology andinnovation will be enacted.

Government is to develop anIndustrial Salt Estate in Keta in theVolta Region.

Ministry of Tourism

Government intends developing thetourism potential and createemployment opportunities fromthose activities.

Ministry of Energy

Key projects to be implemented inthe year 2011 include the BuiHydroelectric Power Project, GhanaEnergy Development and AccessProject, and 132 MW Takoradi 3Thermal Projects.

Government will continue itscommitment to oil exploration andgas commercialisation.

Ministry of Environment, Scienceand Technology

Government aims to establish atechnological base for acceleratedgrowth and sustainabledevelopment. In addition,Government will encourage the useof local building materials in theconstruction industry. FurtherGovernment intends to and developGhana’s first Science andTechnology Park. It will alsoimplement plastic waste pilotprojects at two municipalities andpromote commercial agriculture.

To strengthen the governance ofthe oil and gas sector and e-waste,two Legislative Instruments (L.I.’s)to the Environmental ProtectionAgency Act, Act 490 will be finalisedin 2011. Also, the land use andplanning Bill and its accompanyingL.I.’s will be pursued to provide arobust legal framework.


Overall Summary

Ministry of Water Resources,Works and Housing

Government will continue toincrease the provision of safe andpotable water, affordable housing,enhance sanitation and promoteenvironmental sustainability. Acomprehensive National IntegratedWater Resources ManagementPlan will be prepared to addressmajor problems related to waterresource availability, water quality,and institutional capacity.

Government aims to enhanceaccess to housing by constructing200,000 affordable housing units inselected cities and towns across thecountry

Ministry of Transport

For the aviation sector, Governmentwill continue to pursue itsprogramme of making KotokaInternational Airport (KIA) anaviation hub for the sub-region. Therehabilitation works and upgradingof the KIA and the Tamale Airportare ongoing.

The Lake Safety enhancementprogramme is to be continued withthe provision of new ferries and theconstruction of landing stages alongthe banks of the Volta Lake.

As part of the implementation of theEconomic Community of WestAfrican States (ECOWAS) RegionalTransport and Transit FacilitationProgramme, Government hasacquired land at Paga for theconstruction of the Joint BoarderProject (JBP) between Ghana andBurkina Faso to enhance freemovement of goods and serviceswithin the ECOWAS sub-region.

Ministry of Roads and Highways

The Ministry of Road and Highwayswill undertake improvement offeeder roads to support theagricultural sector and The WestAfrica Transport and TransitFacilitation Project to improvemobility.

Ministry of Communications

The priority areas for 2011 includethe development of ICT Park at theTema multi-purpose industrial park.

The implementation of e-applications will be on-going tofacilitate the deployment of ICT tothe public.

Other policy Initiatives

Other key policy initiatives include:

Legal and regulatory frameworkfor PPP will be finalised.Further, PPP initiatives will beundertaken to boost commercialagriculture and construct avehicle interchange over theAccra-Tema Motorway.

Government will undertakehuman resource audit in thepublic sector to ascertain payrollcost, establish optimal staffinglevels, introduce performancebased management system.

Government will continue:

o to address managerial andstructural challengesconfronting education; byproviding facilities forScience, InformationCommunication Technology(ICT) andTechnical/Vocationaleducation as well as trainingand teacher motivation.

o gender parity in access toeducation

o the process of establishingtwo public universities atSunyani and Ho to broadenaccess to tertiary education.

o to promote the use of ICT inbasic and high schoolsnation-wide.

The National LabourCommission is expected toimplement policies andstrategies aimed atstrengthening tri-partism andsocial dialogue, minimisingindustrial unrest andimplementing the NationalEmployment Policy under theLabour Act.

PricewaterhouseCoopers Ghana Budget Highlights: T

Overall Summary

The Economy“A Better Ghana” – Government ragainst 2010’s growth and stabilit

The Economy in 2010

Government reports significantprogress in achieving the betterGhana agenda. Key indicatorsreported in the Budget include:

GDP growth;

Provisional real GDP growth of5.9%, lower than the target of6.5% as at September 2010.

Fiscal deficit;

A budget deficit of 9.3% of GDPat end of October 2010, higherthan the overall budget deficittarget of 7.5% of GDP for theyear.

Inflation;

Average inflation was 12.5% atOctober 2010 as against theyear’s average target of 10.5%.

Period end inflation at the endof October 2010 was 9.4%,slightly higher than the year endinflation target of 9.2%.

Gross international reserves;

Gross international reserves ofabout 3.2 months of importcover at the end of October2010, compared to a target of2.5 months for the full year.

Stabilising the currency.

The Cedi appreciated by 0.1%,2.2% and 5.4% against the USDollar, the Pound Sterling and

th20

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In derouttur2010,data fthe ye

Totalare esReventhreemillionto the(22.7%improadmin

Totalmillionand hGH¢4

TotalSepteGH¢832.8%than tbillion

The pthe enbillionbillionfor the

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Real GDP grew by 5.9%as at September 2010

Inflation rate at end ofOctober 2010 was 9.4%

The good revenueperformance wasattributed to improvedtax administration and apick-up in economicactivity

At the end of the thirdquarter, expenditure hasexceeded the target byby 8%, powered bypayment of outstandingdebts


he Economy 8

eports progressy targets…

e Euro respectively during10.

l Performance

iving the full-year expectedns performance for the yearGovernment used availableor the first three quarters ofar.

revenue and grants for 2010timated at GH¢8.83 billion.ue and grants for the first

quarters was GH¢6,000(23.1% of GDP), compared

budget GH¢5.89 billionof budget) due to

vements in tax revenueistration for the period.

tax revenue was GH¢4,413.4, equivalent to 17% of GDP,

igher than the budget target of,090.5 million by 7.9%.

expenditure to the end ofmber 2010 is estimated to be.49 billion, equivalent toof budget and 8% higher

he budget target of GH¢7.86.

rojected total expenditure atd of the year is GH¢11.34, 2% lower than the GH¢11.57which was initially budgetedfull year.

rojections may be metse of delays in some non-tionary payments.

PricewaterhouseCoopers Ghana Budget Highlights: The Economy 9

The Economy

Monetary Sector

Broad money, including foreigncurrency deposits grew by 31.6% toGH¢11,487.2 million at the end ofSeptember 2010. Governmentnoted that robust growth in savings,and time and demand depositsaccounted for a significant portion ofthe growth.

Government achieved a single digitinflation rate of 9.5% in June 2010.By the end of October 2010,inflation had further declined to9.4%, from 16.0% in December2009.

The performance to date of inflationis commendable. Sustained single-digit inflation has remained elusivein the past and it is hoped thatGovernment will continue adoptingpolicies and measures that will keepinflation in the single-digit domain.

The policy rate which stood at18.0% in December 2009 wasreduced to 13.5% between Januaryand July 2010 by the Bank ofGhana (BoG) and has sinceremained at that level.

The central bank has so far tried touse its policy rate to signal themarket on desirable interest rates,however, commercial lending rateshave not moved in tandem withinflation and the policy rates.Commercial banks have argued thatthe environment within which theyoperate does not provide them withfacilities and assurances that willhelp reduce the probability ofdefault risk. It is expected that theoperations of a credit bureauxshould contribute to reduce defaultrisk for banks, therefore leading toan easing of average lending rates.

Balance of Payment (BOP)performance

At the end of the third quarter, theBalance of Payments registered aprovisional surplus of US$101.66million; the figure for thecorresponding period in 2009 was adeficit of US$29.5 million.Government projects a surplus ofUS$315 million in the overallbalance in anticipation of favourabledevelopments in the capitalaccount.

For the nine-month period toSeptember 2010, a deficit ofUS$2.17 billion (or 18.9% of GDP)was recorded for the balance oftrade (BOT); in 2009, this deficitwas smaller at US$1.76 billion. Theworsening of BOT was attributed toincreased domestic demand forboth oil and non-oil imports. Eventhough the country saw its majorexport commodities experiencingfavourable rises in prices, whichhelped to shore up their exportrevenues, merchandise imports(both oil and non-oil) as at end ofSeptember 2010 had grownsignificantly by – 34.7% – overSeptember 2009 levels.

Gross international reserves stoodat US$3.97 billion, enough to cover3.2 months of imports of goods andservices.

It is noteworthy that a BOP surplushas been achieved, even in the faceof a depressed global demand. Theprice effect of petroleum products ismentioned as one of the factors thateroded part of the country’s BOPsurplus. Consequently, it is hopedthat with the production of oil andgas, we may achieve animprovement in our BOP position.

Summary of SectoralPerformance

The following sectoral growth ratesare projected for 2010;

Sector 2010Outturn(%)

2010Target(%)

% ofGDP

Agriculture 4.8 6.0 32.4

Services 6.1 6.9 32.8

Industry 7.0 6.6 25.7

It is apparent that there is astructural shift in the Ghanaianeconomy as the Services sectornow leads the contribution to thecountry’s GDP. However thepotential of the agricultural sector toachieve higher growth has not beenfully harnessed. Modernisation ofthe agricultural sector has been aperennial budgetary. It is expectedthat Government will remaincommitted to its proposal tomodernise the Agriculture sector

Over a period of 16 months,period-end inflation declined,achieving single digit by end ofOctober 2010

Interest rates tracked inflation,albeit slowly and partially

In spite of a trade and currentaccount deficit, overall BOPsurplus provisionally stood atUS$101.66 million at the end ofSeptember 2010. This isexpected to improve to US$315million at the end of the budgetyear

Gross international reserveshave improved to 3.2 monthsimport cover

The services sector displacedagricultural sector as the largestcontributor to the country’s GDP


The Economy

through mechanisation andembarking on large scale farming in2011.

Macroeconomic Developments inthe West African Monetary Zone(WAMZ)

The first half of 2010 saw significantimprovement in macroeconomicperformance in the WAMZcountries. End of year real growth isexpected to average 7.2%,compared to 6.3% in 2009. For thefirst time, Ghana has met three outof the four primary convergencecriteria with the following scores;

Inflation rate (end period);9.5%.

Central bank financing of fiscaldeficit as a percentage ofprevious year’s tax; 2.9%.

Gross external reserves, (3.2months import cover).

Government should continue topursue policies that will enable it tosustain this achievement and fullymet all the convergence criteria bythe January 2015 deadline.

The World Economy

Based on the InternationalMonetary Fund (IMF) forecasts,global output is expected to expandby 4.8% in 2010 and 4.2% in 2011.These growths are to be led byemerging and developingeconomies with projected rates of7.1% and 6.4% respectively in 2010and 2011.

Growth projection in advancedeconomies is however expected tobe about 2.7% and 2.2% in 2010and 2011 respectively.

The country’s development partnersmay cut back on aid due to the stateof the world economy.

Overview of Macroeconomicframework for 2011

Government intends to achieve thefollowing key macroeconomictargets in 2011:

Real GDP growth (excluding oil)of 7.0 %;

Real GDP growth rate(including oil) of 12.3%;

Average inflation target of 8.8%;

End of period inflation target of8.5%;

Fiscal balance of a deficitequivalent to 7.5%; and

Gross external reservesequivalent to not less than threemonths import cover of goodsand services.

Considering that oil production willhave just begun, the 5.3%contribution to GDP growth from thesector would appear quiteambitious.

Resource Mobilisation

Total revenue collection (oil andnon-oil revenue including grants) forthe year 2011 is estimated atGH¢10,601.10 million (equivalent to34% of GDP). Total oil revenue in2011 is estimated at GH¢ 584million (equivalent to 1.9% of GDP).

Total domestic revenue collectionfor 2011 is projected at GH¢9,299.5million, representing 29.9% of GDP.

Total tax revenue is estimated toincrease by 26.4% over theprojected outturn for 2010. Thiswould be on the backdrop of astrengthened tax administration.

There have been a number ofchallenges that continue todrawback the achievement ofGovernment’s fiscal goals. Theseinclude:

low level of domestic revenuemobilisation that often result inshortfalls in expected revenue;

increased competingexpenditure demands for thelimited resources;

the tension between balancingexpectations for high economicgrowth and reduction in fiscaldeficits and inflation; and

efficient cash management tomeet Government expenditureobligations in a timely manner.

For the first time, Ghanahas met three out of thefour primary convergencecriteria

Oil and non-oil revenueand grants for the 2011budget are estimated atGH¢10,601.10 million,equivalent to 34% of GDP


The Economy

Real Sector

Based on the “Ghana SharedGrowth and Development Agenda”(GSGDA), Government projects toachieve the following sectoralgrowth rates in the medium term:

Activity

Year

GDP growth rate

(excluding oil)

GDP growth rate(including oil)

11 12 13 11 1213

GDP 7.0 7.0 7.0 12.3 9.38.3

Agric 6.1 6.0 6.0 6.2 6.16.0

Industry 8.2 8.4 8.4 25.4 14.1 12.0

Service 7.3 7.1 7.1 9.9 8.7 7.5

Resource Allocation

Total expenditure for 2011 isestimated at GH¢12,670.8 million,an equivalent of 40.7% of GDP.This consists of GH¢8,924.9 millionon recurrent expenditure, andGH¢3,745.9 million on capitalexpenditure.

The estimated increase in recurrentexpenditure is mainly as a result ofthe increase in expenditure onwages and salaries following theimplementation of the SSSP forpublic sector workers. Wages andsalaries are projected to be about41.8% of recurrent expenditure.

The ability of Government tomanage these fiscal challenges, willto a large measure determine thesuccess or otherwise of attainingthe economic objectives for 2011.

Recurrent expenditure isestimated at GH¢8,924.9million, equivalent to 28.6%of GDP and 70.4% of totalexpenditure

PricewaterhouseCoopers Ghana Budget Highlights: Direct Taxation and VAT 12

The Economy

Direct Taxation and VATEmploying tax principally as a revenue generation tool

Direct Taxation

Overview

The 2011 Budget Statementintroduces a number of taxinitiatives which are primarilyfocused on raising Governmentrevenue by widening the tax net andalso clawing back tax revenuewhich would have been lost toGovernment through exemptionsand concessions granted to thetaxpayer.

Government nevertheless alsoproposes initiatives to benefittaxpayers which include: amendingthe progressive personal income taxthresholds and increasing themandatory Value Added Tax (VAT)registration threshold for personsproviding goods and services whichare subject to VAT.

Administrative Reforms

It is Government’s intention todevelop clear criteria for evaluatingparliamentary permits, waivers andexemptions to further address theperceived leakage of revenue fromsuch concessions.

Government intends to enforce theperiodic re-application for taxexempt status by NGOs andcharitable organisations. Suchapplications should be supported byaudited financial statements and arecord of activities certified by theappropriate sector ministry.

In 2011, administrative reformsinclude:

introduction of electronicequipment to monitor revenuesfrom CST;

introduction of effective ways oftaxing self employedprofessionals;

increased monitoring of taxreliefs and exemptions with aspecial focus on enterprisesoperating in special areas suchas the Free Zones; and

improving audit of top tier VATpayers.

Personal Income Tax

For the second successive year,Government proposes to revisepersonal income tax thresholds. In2011, the first GH¢ 92 (GH¢ 84 in2010) of monthly income will be freeof tax. Monthly income in excess ofGH¢1,690 (GH¢1,350 in 2010) willbe subject to the top rate of 25%tax.

Government further proposes toimprove the quantum of personaltax reliefs which have not beenchanged since 2007.

The widening of the tax bands willimprove the take-home pay ofemployees in the formal sector.

Whilst the proposed revision ofpersonal reliefs is welcome, it isconsidered that personal reliefswhich are regularly revised in linewith inflation (rather than the currentflat amounts in most cases) wouldhave a more noticeable impact ondisposable incomes.


Changes to the VATregime are expected

Continued focus onadministrative reforminitiatives following theestablishment of theGRA

Periodic re-applicationfor exempt organisationstatus to continue

Proposed changes toprogressive personalincome tax thresholds

The flat amounts ofpersonal reliefs grantedto resident individuals willbe increased



Furthermore, a review of the currentlegal requirement to obtain tax reliefcards before personal tax reliefs aregranted should be considered. Thisshould reduce the administrativeburden on both taxpayers andGovernment and encouragetaxpayers to claim their reliefs, asintended by Government.

Taxation of Self EmployedProfessionals

Beginning 2011, as part of the effortto capture self employedprofessionals within the tax net,Government proposes to establish aspecial desk at the GRA. The mainaim of this desk is to ensure thatself employed professionals are taxcompliant. It is anticipated that theGRA will coordinate its efforts withthe Registrar General’s Department(RGD), to facilitate monitoring andenforcement of its tax complianceinitiatives.

This is an initial step byGovernment to close the tax gap inthe self employed sector. Thiswould be achievable if the processis clear and good linkages areestablished with the RGD and otherlicensing bodies as intended.

Vehicle Income Tax

Quarterly vehicle income tax ratesapplicable to hiring cars, touroperators and articulated timbertrucks have been increased by anaverage of 3 times the existing flatrates that have been applicablesince 2005. Transport owners mayclaim the quarterly taxes paid inadvance as a credit against theiroverall tax liabilities.

This is a notable effort to bringvehicle income taxes in line withother (personal and income) taxes,whilst generating revenue.Notwithstanding that these rateshave not changed since 2005, theproposed increases are high. Thereremains a possibility that vehicleowners may pass on the increasedcost to their passengers,.

Tax Stamp for Informal SectorOperators

Since the introduction of the TaxStamp for the informal sector in2004, the rates have remainedunchanged. Government proposesto increase these rates in line withinflation and expects to table a Billto that effect in due course.

Withholding Tax

The threshold for withholding taxeson the provision of goods andservices between two Ghanaianresident entities has been increasedfrom GH¢50 to GH¢ 500.

The GH¢50 threshold has been inplace since the Internal RevenueAct, 2000, as amended (IRA) wasenacted. This increase shouldreduce the associated cost of taxadministration.

Increase in Withholding TaxRates on Payments to ForeignSuppliers

In line with Government’s goal ofenhancing local content, thewithholding tax rate applicable topayments to foreign suppliers is tobe increased to 15% final tax.

Given that current rates ofwithholding tax on payments to non-resident suppliers (in the absence ofa Double Taxation Agreement –DTA) is 15%, the proposed changesare considered to be targeted atpayments made by operators of oilblocks in the Ghanaian upstream oiland gas industry to their non-resident sub-contractors.

Questions that may arise include:

would the applicable DTAs berelevant to such transactionsand potentially reduce thewithholding tax rate?.

what impact would theproposed changes have onwithholding tax rates in existingPetroleum Agreements?

would current registrationrequirements for foreignsuppliers doing business inGhana be removed?

Presumptive quarterlyvehicle income tax to beincreased by an approximateaverage of 3 times thecurrent amount

Increase in tax stamp ratesfor informal sector isexpected

Increased monitoring of self-employed professionalsthrough collaborationbetween GRA and RGD

Increase in the threshold forwithholding taxes to GH¢500(from GH¢ 50)

Increase in withholding taxrate for non-residentsuppliers from 5% to 15%



Reviewing Income TaxExemptions

Government intends to enforceexisting provisions which seek totax income from commercialactivities of exempt institutions.

The IRA currently subjects incomederived from commercial activitiesby an exempt organisation to tax.

Clarification will be required as towhether Government intends toreduce the number of entitiescurrently classified as exemptinstitutions or rather seek toimprove processes and proceduresto effectively cover commercialactivities by tax exempt institutionshitherto not properly covered.

Industry Concessions – RealEstate Companies

It is the intention of Government toabolish the blanket 5-year incometax exemption for real-estatecompanies engaged in theconstruction for, letting, or sale ofresidential premises. To benefitfrom the 5 year exemption, only realestate companies that partner withthe Ministry responsible for Worksand Housing to provide affordablehouses will be eligible.

Real-estate companies whichprovide affordable low cost housingmay need to conduct tax focused,cost-benefit analyses to assess theresulting tax benefit should theypartner with the Ministry of Worksand Housing.

To ensure that tax leakage does notarise, there is a need to establishclear, accessible and transparentprocedures, as well as stipulaterequirements that must be met priorto partnering with the Ministry forWorks and Housing.

Industry Concessions –Hospitality Industry

Government intends to repeal theGhana Investment PromotionCentre (Promotion of Tourism)Instrument, 2005 (L.I. 1817) whichempowered the Board of GIPC togrant enterprises engaged in thehospitality industry exemptions fromcustom duties, income tax and VAT

and consolidate all applicable taxconcessions in the IRA.

Government’s proposals do not takeinto account indirect taxes.Government should also considerways of including as appropriate theVAT and customs concessionscurrently in L.I. 1817 into therelevant tax laws for completeness.This should assist in Government’sinitiative to promote Ghana as atourism destination.

Government’s intent to repeal L.I.1817 is informed by its desire to fuelthe continuing effort to make policyevaluation and oversight effectiveand to improve institutionalcoordination in the way taxexemptions are administered.

This policy initiative iscommendable especially followingthe recent establishment of theGRA which includes within its aims:providing a holistic approach totaxes and customs administration,and providing common taxprocedures that enable tax payersto be governed by a single set ofrules.

Furthermore, entrusting powers togrant tax exemptions to one office isproper, given practical conflicts thathave arisen in the past from thereluctance of revenue authorities toaccept tax concessions negotiatedby the Board of the GIPC and otherregulatory institutions.

Industry Concessions –Additional Tax Holiday for ARBAPEX Bank

The 5-year tax holiday for the ARBAPEX Bank which was to end in2009 is expected to be extended by5 more years to 2014.

This is welcome news. There washowever an expectation that theexemption from Capital GainsTax(CGT) for securities listed on theGhana Stock Exchange (which isdue to end in November 2010)would be extended for a further fiveyears. Its omission fromGovernment’s budget is unexpected

Powers of the GIPC Boardto negotiate and grant taxexemptions to businessesin the hospitality industrybusiness to be abolished

Restriction in taxexemptions for real estatecompanies

Tax exemption period forthe ARB Apex Bank to beextended to the 2014 fiscalyear



Mineral Taxation

Currently, persons engaged inmineral (other than petroleum andwater) extraction are required to payroyalties to the GRA within 30 daysafter the expiration of every quarter.In 2011, Government proposes thatquarterly payments of royalties bemade monthly.

Payment of mineral royalties on aquarterly basis has existed for over20 years. The proposed changesseek to address Government’sconcern about revenue leakagefrom fluctuating exchange ratesover the quarterly period.

Government’s proposals representa major change in the tax paymentpattern in the mining industry andwill have a significant impact on thecash-flows of entities within theindustry. It is recommended thatclear and timely guidance isintroduced to assist miningcompanies in planning paymentoutflows.

Gift Tax

The tax rate on taxable gifts isexpected to increase from 5% to15% of the market value of the giftso received. The increase in the gifttax rate is introduced in order tobring it in line with the current rateof CGT of 15%.

Property Tax

Government proposes to implementa scheme in the second quarter of2011 aimed at strengtheningcapacity in the administration ofproperty taxes.

Currently, property taxes areapproximately only 0.03% ofGhana’s GDP. Governmentconsiders that in mobilising revenuethrough property taxes,Metropolitan, Municipal and DistrictAssemblies (MMDA’s) are likely tobe less dependent on the DistrictAssembly Common Fund (DACF) inproviding local services andamenities.

Strengthening the administration ofproperty taxes will increase revenuefor local governments’ Homeowners should not be unduly

disadvantaged by arbitraryincreases in property taxes.

National Fiscal Stabilisation Levy

The National Fiscal StabilisationLevy (NFSL) that was due to end by31 December, 2010 is expected tobe extended by an additional year,Government considers this as analternative to the introduction of anadditional profits tax.

The NFSL was introduced as atemporary measure and itsextension is surprising to thebusiness community as there wasan expectation that Governmentwould abide by its timeline forcessation of the NFSL.

Value Added Tax

Abolishing Deferred VATPayments

Government intends to discontinuedeferred payments associated withVAT. In line with this, Governmenthas nevertheless communicated itsintent to ensure timely refunds ofVAT.

The above proposal was expectedsince revenues generated from VATassociated with imported goodshave not been in line with revenuesgenerated from the application ofdomestic VAT.

Currently, the Commissioner-General of the GRA has authority togrant an extension to the statutorydeadline for filing and payment ofVAT. What implications will theabolishment of deferred payment ofVAT have on taxpayers who havebeen granted such concessions?

Clarification is required as to howthe discontinuation of deferredpayments of VAT applies toimported goods.

Reviewing of Mining List

Government intends to review themining list to reflect changes thatfairly meet the needs of theindustry, tighten exemptions, andensure fairness across industries,whilst safeguarding tax revenues.

It is commendable that Governmentproactively reviews equipment usedin the mining industry to ensure that

Property tax rate regimeto be reviewed

The assessable period forpayment National FiscalStabilisation Levy is to beextended to 31 December2011

Deferred VAT paymentsto be abolished

Mineral royalty paymentsto change from quarterlyto monthly

Gift tax rate to beincreased from 5% to 15%

A change in the itemsexempted from VAT byvirtue of being on theMining List is expected tochange



the Mining List includes essentialmining equipment which will benefitfrom relevant VAT exemptions.

There is a concern however thatfollowing the less than expectedperformance of VAT revenueassociated with imports andcustoms duties, Government mayreduce the items on the Mining List.

Increase in Value Added TaxThreshold

It is Government’s intention toincrease the current mandatory VATregistration threshold for retailers ofgoods from the annual minimumturnover of GH¢10,000 toGH¢90,000. This new mandatoryregistration limit will no longer applysolely to retailer of goods but to allsuppliers of goods and servicessubject to VAT.

To expand the tax base, anamendment is expected to be madeto the VAT law to describe a newscheme for VAT taxpayers who fallbelow the GH¢90,000 threshold,who will now fall into a new schemeof combined VAT and income taxassessment.

Reclassifying Zero-RatedSupplies to Exempt Supplies

It is the intention of Government toreclassify the following zero-ratedtaxable supplies as exemptsupplies:

locally produced textbooks andexercise books;

locally manufacturedagricultural machinery andother agricultural implements ortools; and

locally producedpharmaceuticals as determinedby Minister responsible forHealth and approved byParliament.

Government’s reasons for theabove are that the reclassificationwill improve the VAT regime toconform to international standards,in addition to addressing liquidityconcerns of the affected industries.

The reclassification of a zero-ratedsupply as an exempt supply doesnot necessarily or immediatelyaddress liquidity concerns.

Government may seek to implementpolicies and procedures that ensurethat refunds that are due tosuppliers that make zero-ratedsupplies are made on a timelybasis.

Additionally, businesses that couldpreviously recover their input VATwill no longer be able to do so,consequently, the VAT so incurredmay be passed on to consumers.

Communication Service Tax(CST)

It is proposed that CST will apply toall who operate in thecommunications industry.

Currently, only communicationoperators issued with a NationalCommunications Authority (NCA)Class 1 licence are required tocharge the 6% CST oncommunication services theyprovide.

Widening the scope of the CST toinclude those who do not hold Class1 licences is likely to increase therevenue accruing to Government.

Government seeks to ensurefairness across the communicationsindustry in conformity with theexisting CST law. This is expectedto be achieved by the GRA issuingadministrative guidelines on theextension of scope of CST.

The Communications Service TaxAct, 2008 (Act 754) (CST Act)currently does not provide the GRAthe powers to issue administrativeguidelines for the extension of thescope of persons that are liable tocharge CST. A review of the CSTAct should therefore be consideredto ensure that any administrativeguidelines to be issued are inconformity with the applicable taxlaws.

Reclassification of somezero-rated supplies toexempt supplies

Mandatory VAT registrationthreshold for personsengaged in goods andservices subject to VAT tobe increased to a minimumannual turnover level ofGH¢ 90,000

Persons liable to chargeCST is expected to beextended to all personslicensed by the NCA and notjust Class 1 license holders

Extensive monitoring ofcommunication activities isexpected to provide revenueassurance to Government

PricewaterhouseCoopers Ghana Budget Highlights:

Customs & ExcisResource Mobilisation Initiatives

Government remains focused onimproving revenue generation.Increases in customs and exciseduties include the following:

Environmental tax on plasticpackaging materials

There is a proposed 20%environmental tax to be charged onplastic packaging materials andproducts excluding bottled water.Sachet water may also be exemptedupon application by the producers tothe Commissioner-General of theGRA. This is aimed at protecting theenvironment.

There is a need for Government tospecify which plastic packagingmaterials and products are includedin the scope of the new provisions.

Review of Excise Duty Rates

In order to remain competitive and inline with concerns raised by affectedindustries, Government plans to granta 2.5% reduction on ad-valoremexcise duty for all excisable goodswith the exception of spirits andcigarettes. Excise duties oncigarettes are however expected torise from 140% to 150%.

The reduction of excise dutiesimmediately follows the reversal ofexcise duties from specific rates toad-valorem in the prior year budget.This will ensure a reduced productioncost for operators of the industry(excluding spirits and cigarettes).

Restriction on use of bondedwarehouse

Government has reviewed the currentpractice of storing goods for up to twoyears in a bonded warehouse before

taxesnot coof a bowhichhold fo

It is bebonderestricpurpossystemneces

This redirectimportconsueffectisystempay as

The 20introduAccouwas todeposduty pFor thiwas tostock rtrackinintroduto and

The Gas prorestricmaterioperatyear’shave aimport

ExemSavin

An addgrante


Imposition of 20% taxon plastic packagingmaterials and products,aimed at environmentalprotection

Excise duties toexperience a generalreduction of 2.5%, withthe exception of dutieson spirits and cigarettes

Use of bondedwarehouse for importsrestricted to rawmaterials

Customs & Excise 17

eare paid and considers that it isnsistent with the main objectivended warehouse system,is supposed to be a temporaryr imports.

ing proposed that henceforth,d warehouses should beted to raw materials only. Thee for the bonded warehousingwill also be reviewed and

sary changes proposed.

striction will have a significantimpact on the cash outflow ofers of finished goods andmables. Importers will needve cash flow managements to be able to immediatelysessed import duties,

10 budget proposed thection of the Gross Paymentnt (GPA) Facility. This facilityenable bulk importers make

it payments towards the totalayable on warehoused goods.s to be effective, the GCMSbe strengthened to improvedeconciliation. An electronicg system was also to beced to track stock movementfrom the bonded warehouse.

PA Facility was not introducedposed. The current proposal tot bonded warehouses to rawals may be a simpler system toe, administratively, than lastproposal, however, it maysevere dampening effect on

ers’ cashflow.

ption of Taxes on Energyg Lamps

itional exemption has beend for all tariffs on LED lamps as

PricewaterhouseCoopers Ghana Budget Highlights: Customs & Excise 18

Customs & Excise

part of Government’s efforts towardsenergy savings and reduced powerconsumption. This exemption is alsoextended to primary inputs importedby local companies that produceenergy saving bulbs.

Clarity is required as to the following:

which types of companies qualifyfor the proposed exemption;

what constitutes “primary inputs”;and .

specific taxes which are exempt.

Import tax on Rice and PoultryProducts

As a means of harmonising tariffs oncertain imported products in theECOWAS sub-region, a tariff of 35%is to be imposed on imported rice andpoultry products upon ratification ofthe Common External Tariffs (CET)by ECOWAS.

Increase in Airport Taxes

For international travel, airport taxesare proposed to increase from a flatrate of US$75 for all classes, toUS$100, US$150, and US$200 forEconomy, Business and First Classrespectively. Airport tax for regionaltravel are also proposed to increasefrom US$50 to US$60, whilst taxesfor domestic travel are proposed toincrease from GH¢1 to GH¢5.

Tema Oil Refinery (“TOR”) DebtRecovery Levy

The low recovery of TOR’s debt hasprompted an upward adjustment ofthe TOR debt recovery levy whichwas introduced in 2003. This levywas applied on specific petroleumproducts. This upward adjustment isalso to lessen the impact of TOR’shigh debt position on the bankingsystem.

The increased debt recovery levieson certain petroleum products willdirectly drive petroleum pricesupward. This will create pressure onthe Consumer Price Index andeventually increase inflation.

Improving Efficiency in CustomsRevenue Collection

To reduce the abuse of the customsclearance process and to ensuretimely payment of customs duties,only imports by Government or forthe execution of Government projectswill henceforth be allowed to becleared “on permit”. By this measure,all other customs duties will be paidin full before goods are cleared fromthe various entry points.

Exemptions and Permits

The long standing debate on thereasonableness of the various taxexemptions has warrantedGovernment to recommend that clearcriteria are set for evaluating permitsand waivers as well as setting clearclauses when granting suchexemptions.

These will include the following:

limiting personal exemptions towhat is permitted in the law;

review of the Mining list and otherimport tax exemptions;

enforcement of the existingrequirement that NGOs andcharitable organisations re-applyfor tax exempt status; periodicallywith relevant documents such asaudited accounts;

the phasing out in 2011 of specialpermits to health and teachingservice personnel on vehicleimports; and

the assessment of other specialexemptions on their eligibilitycriteria.

Narrowing the avenue for exemptionswill broaden the tax net and mostlikely increase the tax revenuegeneration capacity of the nation.

Government is encouraged to blendthe proposed revenue-leakageprevention strategies with its aim ofstimulating private sector growth.This will ensure that cancellation ofexemptions will not serve as adisincentive to industry operators.

Tariff exemptionextended to LEDlamps

Government’s aim oferadicating dumping ofgoods to be partiallyachieved throughECOWAS’ impositionof a 35% tariff onimported poultry andrice

Airport taxes toexperience upwardadjustments forinternational, regionaland domestic travels

Debt recovery levy onpetroleum products tobe increased

PricewaterhouseCoopers Ghana Budget Highlights: Sectoral Outlook 19

Customs &Excise

Sectoral OutlookMinistry of Food and Agriculture

Government is determined tomodernise agriculture and create jobopportunities in 2011. Key initiativesto achieve these objectives include:

provision of subsidised fertilisersto farmers for increased yield;

establishing agriculturalmechanisation service centresacross the country;

completion of the NationalIrrigation Policy and thecompletion of the Accra PlainsIrrigation Project;

construction of a fish laboratoryand quarantine stations, twoharbours and twelve landingsites and establish a fishprocessing plant at Elmina;

establishing the ExportDevelopment and AgriculturalInvestment Fund to financeAgriculture ;

maintaining a minimumguaranteed price of 70% of thenet FOB price of Cocoa; and

continuing with initiatives suchas Cocoa Disease and PestControl Programme(CODAPEC), Cocoa Hi-Techprogramme, Scholarship trustfund, Cocoa Road ImprovementProject (CRIP) and CocoaFarmers’ pension and housingscheme to stimulate the sub-sector.

Government has outlined a numberof initiatives and projects to ensurethat the sector is modernised. Of thetotal amount proposed for theagricultural sector modernisation,

53% of the funding is expected fromdonor contribution. Considering thesignificant role that agriculture playsin the economy, over reliance ondonor support may not be prudentconsidering the unpredictability ofdonor support.

Government needs to considerhaving a special levy to support theCRIP as a matter of priority.

Ministry of Lands and NaturalResources

Government aims to promote landand sustainable natural resourcemanagement for accelerated wealthcreation through the modernisation ofthe sector. Some of the highlights forthe coming year include:

computerisation of the variousdivisions of the LandsCommission and developmentof an integrated LandInformation System;

expansion of the national forestplantation developmentprogrammes in all districts;

promotion of private sectorinvestment in the forest sub-sector; and

institutional strengthening ofthe mining sub-sector andimproved support to small scalemining.

Government needs to speed upreview of lands management in thecountry to promote private sectorinvestment. Improvement ofprocesses and procedures supportedby the computerisation of the Lands


Several initiativesaimed atmodernising theagricultural sector


Sectoral Outlook

Commission is a step in the rightdirection.

Ministry of Trade and Industry

Support to Private Sectordevelopment, Small, MediumEnterprise (SME), and industrialdevelopment continue to be the mainfocus of Government for 2011. Keypolicy directions include:

a new industrial policy focusingon industrial production anddistribution, technology andinnovation;

work on comprehensive industrialdevelopment andcompetitiveness legislation withemphasis on domestic content;

development of an industrial saltestate in Keta; and

establishing an SME databaseand support in entrepreneurshipdevelopment.

Ministry of Tourism

Government intends developing thetourism potential and createemployment opportunities from thoseactivities. The primary focus will berepackaging and aggressivemarketing of such potential by:

p,articipating in international andlocal fairs/exhibitions;

implementing the NationalTourism Act;

using technology to improveinformation accessibility; and

ensuring quality and standards inservice delivery.

The attraction of Ghana as a touristdestination has not been fullyexploited by Government. Welldeveloped and packaged productswill increase Ghana’scompetitiveness on the internationalmarket. This will include:

the development of infrastructure;and

building capacity of serviceproviders.

Ministry of Energy

Government’s objective for energy isthe development and sustenance ofan efficient and viable energy sector.

Power Subsector

The focus of the power sub-sector isto continue construction of generatingplants, upgrade transmission anddistribution network, and scale uprural electrification, to achieveuniversal access to electricity supplyby 2020. The main focus area underrenewable energy includes thedevelopment of human resourcecapacity in tertiary institutions.

Petroleum Subsector

Government’s objective for the sub-sector is to intensify exploration,production and distribution activities.Government intends to enforceExtractive Industries TransparencyInitiative (EITI), to ensuretransparency in revenuemanagement.

Government must continue to ensurestability and create greatertransparency and accountability inrevenue flows from the extractiveindustry.

Ministry of Environment, Scienceand Technology

Government aims to establish astrong and vibrant technological basefor accelerated growth andsustainable development.

Initiatives to be undertaken during theyear include:

implementation of an Action Planfor utilising local buildingmaterials in the constructionindustry; and

establishment of NationalScience and Technology ThemePark.

Centre for Scientific and IndustrialResearch

Government aims to promotecommercial agriculture, sustainablefisheries management, and fastconstruction techniques for deliveryof affordable housing.

National Tourism Act(NTA) to be implemented

The Renewable EnergyBill currently beforeCabinet

Petroleum Exploration andProduction Bill, and thePetroleum RevenueManagement Bill beforeParliament

Ghana Nuclear EnergyRegulatory Authority willbe established to pave theway for the adoption ofnuclear energy by 2020.

Government to reviewimplementation ofenvironmental legislation

Industrial Policy to bedeveloped

Sectoral Outlook

Ghana Atomic Energy Commission

The Commission will continue todevelop a comprehensive nationalgroundwater resource assessmentprogramme using isotope hydrogen.

Environment

The Ministry will implementdevelopment projects to promoteecotourism, and generateemployment. The NationalEnvironmental Fund will be relaunched. In addition existing feesand levies charged will also bereviewed.

The implementation of the NationalEnvironmental Fund should beguided by policies which ensuretransparency and accountability.

Town and Country PlanningDepartment

Government intends to pursue thepassage of the land use and planningbill, to provide a legal framework toenhance enforcement of planningand building regulations.

Infrastructure Sector

Ministry of Water Resources,Works and Housing

Government continues to focus onincreasing potable water supply,affordable housing, improvingsanitation systems, as well as thepromotion of environmentalsustainability.

Water Supply

Government intends to achieve thetarget of 65.8% and 65.0% ruralwater and urban coverage

housing units across the country aswell as provide oversightresponsibility for the housingprogrammes that involve privatesector participation.

The initiative of Government toprovide affordable housing islaudable, given the current housinggap for the middle to low incomegroups.

Sanitation

Government will develop a drainagemaster plan to ensure orderlydevelopment of physical properties.

Under the National Flood ControlProgramme, the annual flooding ofcertain parts of Northern Ghana as aresult of the spill over of the dam inBurkina Faso should be a priority.

Ministry of Transport

Government intends to:

Seek private sector involvementin the rehabilitation of the railwaysystem, especially the WesternRailway Line and suburbanrailway lines in Accra-Nsawam,Kumasi-Ejisu and Sekondi-Takoradi;

Continue rehabilitation work atthe KIA and other regionalairports; and

Focus on the development of theTakoradi Port to support the oiland gas industry.

Government has been shiftingtowards private sector participation indeveloping the rail and road networkand other infrastructural projects.Government needs to accelerate itsefforts in developing the PPP

National IntegratedWater ResourcesManagement Plan tobe prepared.

Various storm waterdrainage systemsand flood mitigationprogrammes to beundertaken

A Railway MasterPlan to be prepared

Rehabilitation worksat KIA and regionalairports to becontinued.

Enactment andimplementation of theNew Road TrafficRegulations


respectively. In pursuant of theseobjectives, Government will:

draw up a national integratedwater resources managementplan;

start the Kpong water expansionproject; and

sink 20,000 boreholes.

Affordable Housing

Included in Government’s majorinitiatives in 2011, will be to provideaffordable housing by constructing

legislation.

Ministry of Road and Highways

The significant initiatives are:

phase 1 of the improvement andrehabilitation of feeder roads tosupport the agricultural sector;and

the West Africa Transport andTransit Facilitation Project toimprove mobility.


Sectoral Outlook

Ministry of Communication

Government will continue with the e-Government network infrastructureproject aimed at creating a platformfor the deployment of ICT on ashared Government IT architecture;including the development of aWorldwide Interoperability forMicrowave Access (WIMAX) to servegovernment agencies in all regionalagencies.

The NCA will intensify its policydialogue with the telecommunicationindustry players to addresschallenges associated withimplementing the Mobile NumberPortability (MNP) solution.

Ministry of Education

Government’s emphasis will be onthe provision of facilities for science,ICT and technical/vocation education.In line with the MDG’s target ofeliminating gender disparities inprimary and secondary education by2015, Government will supportgender parity programme.Government will establish two publicuniversities at Sunyani and Ho.

Ministry of Youth and Sports

Youth Policy

The National Youth Council (NYC)will continue to organise programmesthat offer the youth opportunities forthe productive use of their talents andleisure. In line with this, deprived andunskilled youth will be trained invocational, technical and leadershipcourses.

The National Youth EmploymentProgramme (NYEP) will be supportedto develop and roll out new modulesto expand its operations to empowermore unemployed and vulnerableyouth.

Ministry of Employment and SocialWelfare

Government will pursue the followingmeasures over the medium term toensure the sustainability of the SingleSpine Salary Structure (SSSS):

rationalisation andstandardisation of allowancesand benefits which are not part ofthe SSSS to ensure that suchallowances are negotiated tosustainable levels;

payroll audits in Public SectorInstitutions to ensure eliminationof ghost names and prevent theirrecurrence;

performance management-related public sector reformssuch as labour rationalisation andothers to ensure that pay is tiedto productivity; and

finalise the National HumanResource Policy document aimedat ensuring the development of aknowledgeable, well-trained anddisciplined labour force.

Ministry of Health

In line with the efforts to achieve thehealth-related MDGs by 2015,Government will continue toconcentrate on improving healthoutcomes by targeting resourcestowards the health of women andchildren, prevention and control ofcommunicable and non-communicable diseases.

Government will implement theNational Child Health Policy andstrategy which seeks to increaseaccess to Maternal, Newborn andChild Health Services (MNCH). TheMinistry will also implement theadolescent health policy and adoptmeasures to ensure safe bloodproduct transfusion.

Following the passage of the MentalHealth Act, the Ministry will develop asubsidiary legislation and adopt acommunity mental health carestrategy to facilitate theimplementation of the Act. TheMinistry’s mission of “Never DenyCare” will be pursued in all healthfacilities.

Ministry of Women and Children’sAffairs

Government is committed toaddressing the challenges identifiedin 2010. Key among the challenges isthe absence of a L.I. on humantrafficking. The Attorney GeneralsDepartment is assisting to draft theL.I. to facilitate the operationalisationof the law.

The Attorney General should work incollaboration with other relevant

The Attorney-General’s office isassisting to draft aLegislativeInstrument tofacilitate the HumanTrafficking Law

Focus on scienceand InformationCommunicationTechnology (ICT) andTechnical/ VocationalEducation

Financial andmaterial support to beprovided to achievegender parity ineducation

The roadmap to fullyintegrate the 38accredited teachertraining colleges intotertiary educationsystem to be pursued


Sectoral Outlook

organisations with interest in humantrafficking in drafting the LI.

In its attempts to eradicate the worstforms of child labour, Government willeducate and sensitise people inprone areas to child labour.

Three shelters for victims of domesticviolence will be constructed.

Ministry of Local Governance andRural Development

In pursuit of Government’s agendaunder community development, skillstraining will be provided inentrepreneurial development andincome generation for CommunityBased Organisations (CBOs).Support will also be given tocommunities to plan, implement andmonitor community initiatedprograms.

Administration Sector

Office of Government Machinery

The Internal Audit Agency willcontinue to engage and collaboratewith the leadership of MMDAs topromote the practice of internal auditwithin their organisations. In thisregard, the Internal Audit Agency willbe promoting the integrated riskmanagement framework to supportinternal audit practices at theMMDAs.

Ghana Investment Promotion Centre(GIPC)

GIPC will continue to promote andmarket Ghana as the destination ofchoice for business. The centre willalso finalise its four-year strategicplan, which will give special focus tothe tourism sector, modernisedagriculture, and service delivery inthe oil and gas sector.

For Ghana to become the preferreddestination for business, the outputsof the strategic plan must includesector investor outreach andpromotion strategies and a system fortracking, follow up and reporting oninvestors’ concerns.

Office of Parliament

To improve Parliamentary oversightof the executive, members willcontinue to hold plenary andcommittee sittings to scrutinise billsand evaluate legislative and

executive performance, aided by thenew office complex in Parliamentwhich houses the new committeerooms. Committees will also makevisits to project sites throughout thecountry, with the objective of ensuringthat Government resources areefficiently utilised.

Strengthening Parliamentarycommittees to better perform theiroversight duties is a critical aspect ofthe work of Members. It is thereforeimportant that oversight functions aresupported with adequate resources(financial, information technology andor human resources).

In an effort to improve the institutionaland logistical capacity of Parliamentto adequately perform theirrepresentative role and to respond tothe needs of their constituents, theMPs Constituency Fund will beestablished, and Government willinitiate a phased programme ofproviding MPs with constituencyoffices.

To further bring Parliament closer tothe people, a dedicated televisionchannel for the live broadcast ofparliamentary sittings andproceedings is planned.

As is found in other democracies, liveproceedings of the activities in theChamber improve the quality ofdebates and the attendance andparticipation of MPs in the work of theHouse.

Audit Service

The Audit Service will focus onoperational gaps and risk areas, andalso place emphasis on procurementaudit and contract administration.The Service will further embark oncomputerised and electronic systemsaudit, payroll audit, and performanceaudit of physical infrastructure. In thelight of the expected increase in theoil and gas sector, the Audit Servicewill organise training on oil and gasrevenue audit.

The scope and nature of Governmentaudits have continued to be widened,moving away from transactionalaudits which do not in general tackledeeper assurance issues such asvalue for money and performanceaudits. The Audit Service wouldneed to continue to develop the

Planned live telecastof Parliamentaryproceedings

Capacity of AuditService staff will bedeveloped toundertake oil and gasrevenue audits

Enhancing civiceducation ahead ofthe 2012 election


Sectoral Outlook

capacity of its staff to effectivelyexecute the wide range of auditsanticipated.

Public Services Commission

The Public Services Commissionplans to establish a human resourcebio databank of personnel in publicservice institutions. A field survey ofhuman resources in the publicservice will be conducted to providethe facts and figures for thedatabank.

With the databank, more informationwill be available on the variety andlevels of competencies andexperience of public servicepersonnel, and add to the richness ofexpertise for policy formulation,analysis and decision making acrosssectors. The availability of such adatabase will facilitate and enhancethe efficient allocation of humanresources.

Electoral Commission (EC)

To ensure free, fair and transparentelections, the Electoral Commission(EC) will replace the voters registerfor the 2012 election. Seminars andconferences will be organised tosensitise civil society organisationson the planned activities of theCommission, and to education thegeneral public on the electoralprocess.

Good governance includes amultiplicity of actors and institutionssuch as political parties, parliament,the judiciary, the media, and civilsociety. In addition to civil society,the EC may therefore want to inviteother actors and institutions toparticipate in its sensitisationprogrammes

Ministry of Foreign Affairs andRegional Integration

Through the pursuit of economicdiplomacy, the Ministry will aim atestablishing a just and equitableinternational economic and socialorder. Respect for international lawand the settlement of internationaldisputes will be pursued incollaboration with other countries andthe appropriate international

organisations. Foreign missions willbe supported to ensure the promotionand protection of the welfare ofGhanaian nationals abroad

Ministry of Finance and EconomicPlanning

Government is resolute in its pursuitto ensure economic growth withstability for the promotion ofsustainable development of thenation and her people. It remainstherefore Government’s intention tointensify interventions in economicstrategy, public financialmanagement, human resource, andinstitutional management capacityprogrammes.

Economic strategy programme

The Ghana Statistical Service willpublish its report and findings of the2010 Population and Housingcensus. A post enumeration surveywill also be conducted, andpreparatory activities for theagricultural census will be carried out.

Government can be commended forconducting the census. From censusdata, Government can derive reliabledemographic data needed forplanning and monitoring national andsub-national progress towards theMillennium Development Goals andother development objectives.

Government will put in place theinstitutional framework for PPP byfinalising the policy and providing theL.I.

Steps will be taken to improve theoperating environment in the financialsector through reform. These willinclude a review of the legal andlegislative instruments to facilitate aneffective regulatory regime, andimprove the low insurancepenetration through the developmentof micro and agricultural insuranceschemes to cater for the informalagricultural sectors.

Creating theinstitutionalframework for PPPand Public AssetInvestments

Sectoral Outlook

Public Financial ManagementProgramme

2011 will see major reforms in thenation’s budget management systemwith the implementation of theProgramme Based Budgeting (PBB)system. Fiscal decentralisation willcontinue to be given the highestattention through the establishment ofa Fiscal Decentralisation Unit in theBudget Division of the Ministry ofFinance and Economic Planning todeal with all issues related to fiscaldecentralisation as well asintergovernmental fiscal relations.

Further, the improved managementof the national payroll system toensure value for money and eliminatefraud will continue to be an area ofpriority. Government plans to ensurethat all pensioners are fully migratedonto the Integrated Personnel andPayroll Database II. The programmeto migrate all subventedorganisations onto the nationalpayroll will be intensified.

Greater transparency andaccountability in the management ofpublic debt has been thrust into thespotlight. The need to have soundfinancial managementImplementation of Ghana IntegratedFinancial Management InformationSystem (GIFMIS) will assist thisprocess.

Ministry of Chieftaincy and Culture

During 2011 the Ministry will beembarking on a number of initiatives,including the review of the legalframework regulating the mandateand activities of the followingorganisations:

The National Commission onCulture;

Ghana Museums andMonuments Board;

The National Theatre of Ghana;

Kwame Nkrumah Memorial Park;

Bureau of Ghana Languages;and

The purpose of the review would beto streamline the laws to reflect thecurrent status of these organisations.The Ministry will also complete theconstruction of the museum ofScience and Technology building andtwo regional theatres.

National Media Commission

Government pledges continualsupport for the National MediaCommission (NMC) to enable it toprovide training for its practitioners onthe Code and Ethics, review its lawand decentralise its activities toaccelerate and enhance mediapractice and reporting.

Ministry of Information

Government plans to develop andclassify the Film Bill for considerationby Parliament before the end of 2011.The Information Bill, which is beforeParliament, will continue to receiveGovernment support.

Government needs to expedite actionon passing the Information Bill.

National Development PlanningCommission

The National Development PlanningCommission (NDPC) will continue toprepare and disseminate an annualprogress report on theimplementation of the Ghana SharedGrowth Development Agenda(GSGDA). The Commission has alsobeen tasked to coordinate thepreparation of National HumanSettlement Policy, the NationalInfrastructure Plan, and the Sectorand District Monitoring andEvaluation Plan.

National Labour Commission

The Commission will continue to trainand educate social partners oneffective labour managementcorporation and promote good faith innegotiations among stakeholders.

Ministry of Justice and Attorney-General

The Minerals and Mining Law, theCriminal Injuries Compensation Law,the Law of Torts, the Law of Contractand the Marriage Registration Law

National MediaCommission to providetraining for its practitionerson Code and Ethics,review its law anddecentralise its activities


The National Symphony.will be reviewed to reflect currentaspirations. The Copyright Tribunal

Sectoral Outlook

will be established and training will beconducted in line with its coremandate of sensitising the public onthe infringement of copyright andrelated issues.

The setting up of Copyright Tribunalis long overdue since the CopyrightLaw was passed in 2005.

The speedy adjudication of copy rightcases will serve as an impetus fordeveloping skills and talents.

The Economic and Organised CrimeOffence Act will be implemented withemphasis on financial or economiccrimes, money laundering, humantrafficking, prohibited cyber activityand tax fraud. The implementation ofthis Act will require collaboration withthe related institutions.

The business registration programmewill be enhanced and provision madeto support its decentralisationprogramme. Further, on-lineregistration of businesses will bepursued with GC Net

Ministry of Defence

To meet the security challengesposed in the oil and gas industry,Government will continue to developnational policies and strategies toupgrade the capacity of the forces byproviding requisite skills, equipmentand logistics. Government plans toset up Petroleum SecurityCoordinating Centre (PSCC) to carryout functions in accordance with theNational Oil Security Plan.

Commission for Human Rights andAdministrative Justice

The Commission will continue tomonitor the implementation of theNational Anti-Corruption Action Plan(NACAP) prepared to assist the fightagainst corruption and reduceopportunities for corrupt practices. Toachieve this, the Commission’sefforts will be strengthened topromote and enhance nationalintegrity through the National IntegrityProgramme by setting up ethics anddesks and advisory committees in theMDAs.

CHRAJ requires continued supportfrom Government to enable it to carryout its mandate effectively. More civiceducation is required to sensitise thepublic

Judicial Service

Government will continue with theimplementation of strategies in theLegal Sector ImprovementProgramme. In pursuance of thatstrategy, Government will initiate theprocess of automating the magistratecourts to facilitate the performance offamily court, juvenile and drug relatedcourts.

Government will also provideadequate support for furtherpropagation of the principles ofAlternate Dispute Resolution (ADR)and the extension of Week EndMagistrate Courts to Kumasi andTakoradi.

Ministry of Interior

The Police Service will intensifymeasures to reduce crime. Theconcept of community police will beenhanced through public education.To improve maintenance of law andorder, the activities of private securityorganisations will be reviewed andregularised.

Ghana Immigration Service will takesteps to enhance revenue generationand mobilisation by ensuring greaterenforcement of Immigration laws andeffective border controls.

A legislative review of the mandate ofthe Narcotics Control Board (NCB)will be undertaken to enhancedetection.

Laws on small arms willbe simplified

Government plans tosupport the propagationof Alternative DisputeResolution (ADR)

Private securityorganisations will bereviewed andregularised

Legal framework of theoperations of NCB to bereviewed


PricewaterhouseCoopers

Appendix 1

Comparison of 2011 revenue estimates with 2010 projected actuals

Items 2011(GH¢m)

ProjectedOutturn for

2010(GH¢m)

Variance(GH¢m)

A. Direct Taxes 3,334.8 2,380.2 954.6

B. Indirect Tax 2,393.1 1,974.1 419

Value added tax (import and domestic) 1,937.7 1,608.3 329.4

Petroleum tax 330 260.5 69.5

Other indirect taxes 125.4 105.3 20.1

C. International Trade Taxes 1,335.9 1,102.7 233.2

Import duties 1,273.7 1,089.6 184.1

Export duty (duty) 62.2 13.1 49.1

D. National Health Insurance Levy 477.7 365 112.7

E. Other Revenue Measures 402.3 453 (50.7)

F. Non Tax Revenue 1,355.7 1,381.7 (26)

Non-oil revenue 1,093.5

Oil revenue 262.2

TOTAL REVENUE 9,299.5 7,656.7 1,642.8

Grants 1,301.6 1,171.7 146.6

TOTAL REVENUE AND GRANTS 10,601.1 8,828.4 1,772.7

A. Foreign Financing 1,117.1 1,340.8 (223.7)

Loans 1,618.7 1,678.9 (60.2)

Amortisation (619.8) (459.8) 160

Exceptional financing (HIPC Relief) 118.2 121.7 (3.5)

B. Domestic Financing 1,219.8 1,618.5 (398.7)

TOTAL FINANCING 2,336.9 2959.3* (622.4)

* We note that in the Budget Statement the figure provided does not agree with this total


Appendix 2

Comparison of 2011 expenditure estimates with 2010 projected actuals

Items 2011 Projected(GH¢m)

ProjectedOutturn for 2010

(GH¢m)

Variance(GH¢m)

A. Recurrent Expenditure 8924.9 7,846.2 1,078.7

Wages and salaries 3,732.8 3,283.0 449.8

Goods and services 604.2 780.0 (175.8)

Transfers 2,352.7 2,103.9 248.8

Interest payments 1,831.3 1,310.9 520.4

Other recurrent expenditure 403.9 368.3 35.6

B. Capital Expenditure 3,745.9 2,904.8 841.1

Domestic-financed 1,587.5 1,154.8 432.7

Foreign-financed 2,158.4 1,750.0 408.4

C. HIPC and MDRI-financed 288.9

D. Arrears clearance and tax refunds 267.3 302.8 (35.5)

TOTAL EXPENDITURE (INCLUDINGARREARS CLEARANCE AND TAXREFUNDS)

12,938.01 11,342.7 1,595.4

Glossary


ADR Alternative Dispute ResolutionBOG Bank of GhanaBOP Balance of PaymentBOT Balance of TradeCRIP Cocoa Road Improvement ProjectCST Communication Service TaxDTA Double Taxation AgreementEC Electoral CommissionECOWAS Economic Community of West African StatesEITI Extractive Industries Transparency InitiativeGDP Gross Domestic ProductGH¢ Ghana CedisGIFMIS Ghana Integrated Financial Management Information SystemGIPC Ghana Investment Promotion CouncilGPA Gross Payment Account facilityGRA Ghana Revenue AuthorityGSGDA Ghana Shared Growth Development AgendaICT Information Communication TechnologyIMF International Monetary FundIRA Internal Revenue Act, 2000 (Act 592) as amendedJBP Joint Border ProjectKIA Kotoka International AirportMDA s Ministries, Departments and AgenciesMMDAs Metropolitan, Municipal, and District AssembliesNCB Narcotics Control BoardNDC National Democratic CongressNDPC National Development Planning CommissionNMC National Media CommissionPPP Public-Private PartnershipsSME Small Medium EnterpriseSSSP Single Spine Salary PolicySSSS Single Spine Salary StructureTOR Tema Oil RefineryVAT Value Added TaxWAMZ West Africa Monetary ZoneWIMAX Worldwide Interoperability for Microwave Access


Contact UsCOUNTRY SENIOR PARTNER

Felix Addo Partner (Direct Line: 761614) – [email protected]

ASSURANCE

Mark Appleby Partner (Direct Line: 761623) – [email protected] Asiedu-Antwi Partner (Direct Line: 761533) – [email protected] Allen Partner (Direct Line: 761471) – [email protected] Amui Partner (Direct Line: 761449) – oseini.x.amui @gh.pwc.comSarah-Mary Frimpong Director – [email protected] Brocke Director – [email protected] Darkwa Director – [email protected] Karanja Director – [email protected] Tiwaah Osei-Yeboah Associate Director – christina [email protected] Gomado Senior Manager – [email protected] W Amusa Senior Manager – [email protected] Apeakorang Senior Manager – [email protected] Arhin Senior Manager –[email protected]

ADVISORY

Wyczynsky (Vish) Ashiagbor Partner (Direct Line: 761465) – [email protected] Tamattey Partner (Direct Line: 761578) – [email protected] Goza Senior Manager – [email protected] A Akufo Senior Manager – [email protected] Nelson Senior Manager – [email protected] Sanusi Senior Manager – [email protected]

TAX

Darcy White Partner (Direct Line: 761576) – [email protected] Kwatia Partner (Direct Line: 761459) – [email protected] Adiasani Senior Manager – [email protected] Bedwei Senior Manager – [email protected] Afua Okoh Senior Manager – nana [email protected]

OPERATIONS

Barbara Coleman Senior Manager – [email protected] Nti-Appiah Senior Manager – [email protected] Norkor Nelson Senior Manager – [email protected] Aikens Senior Manager – [email protected]

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