Following the completion of a review of Ghana’s economic performance the IMF has published a report covering the economic outlook. The IMF considers the outlook for Ghana is difficult with downside risks. The fiscal consolidation target for 2015 is on track but government financing remains a challenge.

Structural reforms are necessary to ensure that gains from fiscal consolidation are sustainable in the medium term. The government is making efforts to implement a number of reforms including broadening the tax base and strengthening tax compliance. Corporate income tax and customs exemptions have been estimated to cost around 1% of GDP and the World Bank has estimated that VAT exemptions are almost 4% of GDP. Ghana’s Tax Expenditures Committee is to work on evaluating the incentives currently given and formulate a plan to streamline the most regressive incentives.

The 2016 Budget increases the resources available for the VAT refund account and further measures are being taken to avoid any accumulation of VAT arrears. A Compliance Risk Committee is to be established to deal with compliance risks and to broaden the tax base by improving the targeting of audits.

The IMF report notes that Ghana has adopted the presumptive income tax as part of the new Income Tax Act 2015. The 2016 budget proposes a revision to the VAT registration threshold and the government will subsequently increase the threshold for classification of large taxpayers.

The income tax exemptions for free zone companies following the tax holiday period have been partly reduced. Also the budget contains a proposal to introduce mandatory approval by the Ministry of Finance before exemptions are submitted to parliament, and administrative measures to limit abuse of exemptions.

The IMF notes that structural reforms need to be strengthened and accelerated so that gains from fiscal consolidation are sustained. Increasing the administrative oversight of tax incentives is a step towards minimizing revenue leakages but the review of tax incentives planned by the government is important to enable them to eliminate regressive parts of the system. Also the modernization of the GRA must be accelerated to sustain revenue mobilization.