Businesses decry new levies

The Chief Executive Officer (CEO) of the Ghana National Chamber of Commerce and Industry (GNCCI), Mr Mark Badu-Aboagye, has said the timing of the new Income Tax Act, 2015 (Act 896) will not be favourable to businesses in the country.

He said businesses were now insulating themselves from a number of economic challenges such as unrelenting power crisis, depreciating cedi and high interest rate that engulfed the nation, therefore, the implementation of the new Income Tax Act would be suicidal.

Speaking to the GRAPHIC BUSINESS in Accra, Mr Badu-Aboagye indicated that the new Act which replaces Act 592 would put businesses under intense uncertainty.

“The private sector is reeling under uncertainty from the introduction of the new law as this will affect business planning and will consequently collapse lots of businesses”, he said.

He said business had already prepared their budgets and the new Act which comes with increases in taxes would only deepen the woes of the private sector.

According to him, the government did not do enough consultation with stakeholders before that Act was passed into law.

Widen the tax net

Mr Badu-Aboagye added that the best way to increase revenue was to widen the tax net and not increase taxes for the same people who already honour their tax obligation.

He pointed out that although Ghana's population was about 25 million, only two million people honoured their tax obligations to the state.

He said it was, therefore unfair when the government always taxed the few, rather than finding innovative ways of widening the tax net.  

The budget introduced a number of measures to directly impact the revenues earned from direct taxation. Direct taxation is expected to form about 42 per cent of government’s tax revenue; and as such, any mechanism to either boost its collection, widen its base or close opportunities for leakages will be welcoming.

In the area of direct taxation, the 2016 Budget focused on tax policy and administrative measures as opposed to the introduction of new taxes or variation in tax rates.

This step however, was, expected given that a new Income Tax Act was recently passed which addresses some key concerns and proposals raised in the past by taxpayers.

Implementation of Income Tax Act 2015 (Act 896)

Act 896 was passed and assented by the President on September 1, 2015. This Act repeals Act 592 from January 2016.

The basis of taxation has moved from modified worldwide to full worldwide basis. This means that residents will now be taxed on all incomes regardless of source and whether or not foreign income earned is brought into Ghana.

The passage new Act, however, brought a number of concerns, especially those relating to the withholding tax on the provision of services and the payment of tax on interests paid to individuals.

On the issue of the imposition of a one per cent tax on interest earned by individuals, the government had already submitted proposals to Parliament to reverse the position.

This review included consolidating the general fiscal regime, Minerals and Mining Income Tax, Petroleum Operations Tax, and the taxation of entities such as Public, Mutual, and Non-Profit Causes.

It simplifies the provisions of the legislation and makes it more user friendly, enhances efficiency and facilitates compliance.

It further broadens the tax base and removes the narrow and distorted tax base of the Internal Revenue Act, 2000 (Act 592); rationalizes, streamlines and restrict tax concessions; tackles erosion of the tax base and aligns domestic tax rules with current international tax rules.

The law provides additional benefits for taxpayers as all taxpayers are now allowed to determine and pay taxes based on their own estimates; carry forward losses and take account of losses on the disposal of capital assets. — GB