Allowances must be taxed -Terkper
The Minister of Finance, Mr Seth Emmanuel Terkper, has justified the introduction of the new Income Tax Act, 2015 (Act 896), saying it is not a tax measure in isolation but incorporates tax incentives.
Advertisement
He said tax incentives became a key element when the revenue modernisation programme was launched in 2009.
He, however, noted that local businesses were reeling from a tax burden because they did not take advantage of the incentives under the new tax regime.
“Ghana’s tax law actually incorporates tax incentives. The tax burden is also a result of local industries not taking advantage of incentives and being under the impression that they are for foreign companies,” he said.
Mr Terkper was speaking at the Graphic Business/Stanbic Bank Breakfast Meeting series on the topic: “The new Tax Law — Its implications for the economy and businesses”, in Accra yesterday.
The new Income Tax Law was passed in 2015 but its implementation started in January 2016. The law replaced the Internal Revenue Act (Act 592).
Allowances must be taxed
Touching on why allowances needed to be taxed, Mr Terkper said, “Yes, allowances must be taxed. They are income.”
Explaining why all forms of incomes attracted tax, he said “incomes need definitions broadly or else there is the tendency for the government or the law to tempt one to put money in places not attracting tax”.
Other Trending Stories
He also made a comparison between treasury bills and small businesses, saying they were all geared at making some income and so they all needed to attract tax.
He stated that the new Income Tax Act was not an accident but a conscious effort by the government to enhance Ghana’s tax regime.
“We need fiscal tools to fall on, do corrections and take them off as things improve, else we go deeper and deeper into problems,” he said.
“We need a correction because the prospects are bright for Ghana,” he stated, pointing out that tax instruments must be seen as instruments of reform.
He explained that the act was an instrument of correction, a correction which was needed to avoid the option of funding the budget at the back of borrowing.
“The law is only saying that if you don’t have a record with the Ghana Revenue Authority (GRA), then another person will take the tax,” he said.
Mr Terkper explained that people with tax clearance certificates were exempt from paying withholding tax and that it was a compliance mechanism that also complemented auditing.
Tax returns
He said local companies could benefit from tax incentives if they properly filed their tax returns and on time.
He, therefore, urged Ghanaian business owners to rise up to the challenge and provide good records on their tax returns.
Parliament
Mr Terkper lauded Parliament for its fiscal agenda, listing various acts passed such as the VAT Act, 2013 (Act 870); the Excise Act, 2014 (Act 878); the Customs Act, 2015 (Act 891), and the new Income Tax Act, 2015 (Act 896) as inuring to the benefit of the country.
Other speakers at the meeting, which was chaired by Prof. Kwame Bosiako Omane Antwi, the Chairman of the Board of the Graphic Communications Group Limited (GCGL), were the Deputy Commissioner in charge of Policy and Programmes at the GRA, Mr Edward Gyamera, and a tax consultant, Mr Abdallah Ali Nakyea.
Advertisement
The meeting was supported by Busy, an Internet service provider, Citi 97.3 FM and Graphic News App.
Writer’s email: edmund.asante@graphic.com.gh