The Ghana Revenue Authority (GRA) is set to rigorously enforce the Excise Duty law, mandating manufacturers of excisable goods to issue bonds or securities.
This development was revealed by Kwabena Apau Awua Anto, Head of the Excise Unit at the GRA, during a recent webinar organized by the UK-Ghana Chamber of Commerce (UKGCC) and PwC Ghana.
Under the Excise Duty Act 2024 (Act 878) and its subsequent amendments, manufacturers producing excisable goods must register under the law, register their warehouses, and provide a bond or security. While the first two requirements have been strictly adhered to, the third requirement has seen lax enforcement. However, Mr. Anto indicated that this is about to change.
“All manufacturers producing excisable goods are required to register under the Excise Duty law. This is the first point of compliance. The warehouse where you are keeping those excisable goods must also be registered, and you should also provide a bond or security. The first two are rigorously being followed. It is the third part, which is the issuance of a bond or security, that has been relaxed, but discussions are ongoing to begin rigorously enforcing that too,” he mentioned.
Mr. Anto emphasized the critical role of bonds in providing essential information about the quantity of excisable goods produced, the excise duty to be collected, and the payment deadlines. Bonds also serve as a safeguard for the GRA to recover taxes if a manufacturer fails to pay.
“A bond must therefore be issued to provide grounds for the Commissioner General of the GRA to retrieve taxes should the manufacturer fail to pay according to the law. Manufacturers who fail to enter into bond or lodge security will pay twice the amount of duty in penalties,” he added.
Manufacturers planning to increase their production must ensure their bonds reflect these changes to facilitate accurate revenue collection.
Understanding Excise
Excise is an indirect tax imposed on selected products, either locally manufactured or imported. Unlike the general consumption tax such as Value Added Tax (VAT), excise duties are levied at various stages of the manufacturing process, including the point of sale, distribution, importation, or manufacture.
Excise duties serve multiple purposes, including discouraging behaviors that lead to non-communicable diseases such as hypertension and diabetes. For instance, the recent amendments introduced excise duties on sweetened beverages and fruit juices to reduce their consumption due to associated health risks.
Excise duties also aim to redistribute wealth by taxing products largely consumed by affluent individuals, thereby benefiting society.
Excisable Products
Excisable goods as defined by the Excise Duty Act 2014 include alcoholic drinks, with spirits and wines attracting duty rates of 50% and 45% of their ex-factory prices, respectively. Tobacco products now have a hybrid excise duty rate, combining a per-stick charge with an ad valorem rate.
Beers and malt drinks are subject to a sliding scale policy, granting concessionary duty rates based on the quantity of local raw materials used. Fruit juices are subject to a standard excise duty rate of 20%, whether locally manufactured or imported. Pharmaceuticals and textiles (domestic/African prints) are zero-rated, while plastic products and petroleum products are also excisable.
Compliance and Penalties
Compliance with the Excise Duty Act begins with registration. Manufacturers who fail to register or manufacture outside a registered warehouse face significant penalties, including paying twice the duty amount. Other offenses, such as failing to submit returns or pay taxes on time, attract additional fines and interest.
“Excises are not that popular. However, we have introduced measures to make sure that there is compliance, and to protect people’s brands so all of us should take an interest in making sure we comply,” Mr. Anto stated.
Challenges and Solutions
Maxwell Ntiri, Senior Manager at PwC Ghana, noted challenges in Ghana’s excise tax regime, including insufficient tax education, inconsistent enforcement, and varying interpretations by tax officials. Solutions proposed include intensified tax education, consistent application of tax laws, and robust compliance enforcement.
Mr. Anto acknowledged the cumbersome registration process but assured that GRA officers are available to assist clients.
Future of Tax in Ghana
Daniel Nuer, Head of the Tax Policy Unit at the Ministry of Finance, indicated that Ghanaians could expect more excise tax regimes as the government seeks to reduce other taxes and provide incentives for various sectors. He urged industries to communicate their concerns to tax authorities for consideration in policy-making.
“Imitation tax stamps and smuggling works against our jobs and our livelihoods so when you notice things like this, give us a call and we will follow up,” he said.
Mr. Anto also encouraged Ghanaians to use the GRA Tax Stamp Authenticator app to verify the authenticity of tax stamps and enhance compliance.
The webinar also covered related topics such as tax credits, refunds, zero-rated excisable goods, the emissions levy, and differences between VAT and Excise Duty exemptions.