Govt defends new Income Tax Act

A Tax Policy Advisor at the Ministry of Finance, Dr Edward Larbi-Siaw, has said the rates under the new Income Tax Act, 2015 (Act 596) would be looked at again.

He said although government would not remove everything, it has noted with concern the reaction by taxpayers and would respond appropriately.

“You are working with human beings, so as a listening government it is possible we will look at the rates again. There will be a reaction sooner than you can imagine,” he said.

Speaking to the GRAPHIC BUSINESS, he said the new tax was introduced purposely to expand the tax base and not to cripple businesses in the country.

He stated that from 2000 when the Internal Revenue Act 2000 ((Act 592) was introduced, there had been several amendments and, therefore, there was need for a consolidation of all the laws relating to income tax after 15 years of operation of Act 592. 

“If people are thinking it will collapse businesses, then it is a misunderstanding because the withholding tax is not a final tax. Actually, if you are a good tax payer you won’t be affected. If you don’t bring some of these withholding taxes to a level where people will feel it, then they will say ‘once the tax authorities withhold five per cent I won’t bring my final returns,’” he said.

 Instead, he said people and businesses should rather put themselves in the position where they would be exempted, “and you will be exempted when you file your returns on time; and when you are a good tax payer, the Commissioner General will say when you are doing business with A, B, C, D, you should not withhold that 15 per cent which people are complaining about.”

Income Tax Act, 2015 (Act 596)

The Income Tax Act, 2015 (Act 596) replaces the Internal Revenue Act 2000 (Act 592) and seeks to simplify the income tax regime and improve tax compliance.

It is expected to yield additional revenue equivalent to 0.3 per cent of the Gross Domestic Product (GDP).

Dr Larbi-Siaw said the new tax law, among others, intended to reduce or remove the tax exemptions and incentives which were contained in the previous tax law.

“Whereas the previous tax law exempts from tax or provides tax holidays, the current one does not. All over the world, taxation is a sovereign issue and in Ghana, it represents the largest source of the government revenue both at the national and local levels,” he said.

He emphasised that the intention was not to punish companies but added that because companies had not been adhering to tax laws, “they don’t file their returns. Some even got withholding tax exemptions and they were no more behaving like good tax payers, so after the first quarter of 2015 the Commissioner General suspended those tax payers who were not required to have a withholding tax.”

Implementation of the Income Tax Act, 2015 (Act 596)

The increase in withholding tax on services to 15 per cent is to encourage taxpayers to file their returns, after which they will be entitled to a credit for the amount withheld.

The Act allows the Commissioner-General to grant exemptions from withholding tax to compliant taxpayers.

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

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