Let’s widen tax net and not deepen it

From time immemorial people have not liked the tax collector because he takes money from them regularly.

However, taxes have become acceptable globally as one major way of raising funds for national development.

Last Tuesday, the Graphic Business and Stanbic Bank Ghana jointly organised a forum dubbed the Breakfast Meeting series to discuss the issue of taxation, with specific reference to the new Income Tax Act, 2015 (Act 896).

The discussions and presentations centred on the theme: “The new Tax Law, its implications for the economy and businesses” and, as was expected, it generated a lot of interest.

Although the new Income Tax Law was passed in 2015 to replace the repealed Internal Revenue Act (Act 592) and became operational in January 2016, explanations on some sections of the law offered by the speakers at the forum, including the Minister of Finance, Mr Seth Terkper, had set many people on edge. 

The pronouncement by Mr Terkper that all income, including allowances and gratuity, were to be taxed under the new law because they all fell under income had particularly stirred the hornets’ nest.

The Daily Graphic, like many Ghanaians, believes that taxes are needed to ensure development and money in the government’s purse to run the country.

It is through taxes such as income tax that the government is able to construct roads, build hospitals and schools, embark on capital projects and provide other infrastructure.

The challenge, however, is that only a few tax eligible people, which the President puts at 30 per cent, are taxed on their incomes, leaving the other 70 per cent to enjoy from the toil of the few.

Currently, it is mostly salaried workers who are taxed monthly, thereby placing a heavy burden on them. This, we believe, is not fair.

One of the key issues identified at Tuesday’s forum was that the formal sector was crushing under the burden of many taxes on salaries and allowances, while the informal sector had been left to go free of taxes.

We agree with the stakeholders at the meeting that the government must widen the tax net to correct the anomaly, instead of deepening it by letting just a few people bear the tax burden.

Ghana, certainly, needs taxes to develop, especially as it seeks to generate revenue locally to reduce its dependency on foreign aid.

The way to go is not to find the easiest way out by taxing the incomes of only workers in the formal sector. Workers in the informal sector, such as artisans, traders, caterers and other such trades engaged in by individuals and people in private businesses; outnumber those in the formal sector.

It is, therefore, only reasonable that those who benefit from the national cake should also be made contributors to the cake.

We urge the Ministry of Finance and the Ghana Revenue Authority (GRA) to develop innovative ways to capture all income earners into the tax net to lessen the burden on the few who currently bear the brunt of the many taxes imposed by the government.

That way, and with a reduced percentage charge on incomes, we will not only rake in more revenue from the taxes generated but also not impose a tax burden on only a few in the formal sector.