Tax Warning

Businesses should brace themselves up for some tax adjustments expected to be announced in the 2010 budget to improve government revenue.

A deputy Minister of Finance and Economic Planning, Mr Seth Terkper who dropped the hint at a pre-budget forum organised by the PriceWaterhouseCoopers (PWC) in Accra, advised businesses to always plan with taxes in mind, saying “there will be a lot on the tax menu in the next 15 months. The budget will be clear on them.”

Although the minister declined to clarify what his statement meant, he had initially alluded to how negatively, the twin deficits and arrears were impacting on businesses and the economy, and said the Government would need to take a number of measures to ensure stability and induce growth.

These include a review of tax incentives, broadening the tax net as well as the consolidation of the revenue agencies into what would become known as the Ghana Revenue Authority (GRA), for which a draft bill had just been completed for onward submission to Cabinet for study.

The deputy minister, a tax expert who was instrumental in the introduction of the Value Added Tax (VAT), said the establishment of the GRA was only part of the revenue administration and policy reforms, saying subsequent to that would be tax reforms aimed at injecting fairness and efficiency into the tax system.

This would go with the automation of the revenue agencies under the supreme e-government/e-Ghana project which would necessitate the integration of some tax laws to be consistent with the electronic support system.

The business community, as usual, raised a number of concerns regarding taxation, and among other things, asked for a review of the refund system under the various revenue agencies as well as a downward review of the rate of withholding tax from the current five per cent.

He said the Government was pursuing a liberal tax and incentive policy regime which dictated that the tax net needed to be widened.

One of the reasons for introducing VAT was to widen the tax net to ensure the lowering of some tax bands such as corporate and income tax, the deputy minister explained.

However, exemptions were creeping back fast under the VAT system due to poor functioning refund system, which Mr Terkper said should be improved to stop the exemptions and safeguard government revenue.

Mr Terkper also dismissed suggestions that the Government was not spending because it had an austerity agenda, explaining that “fiscal prudence does not necessarily mean a cut on growth.”

The Government, he said, had exceeded its targeted expenditures due to the huge arrears that needed to be settled, a situation that had led to higher domestic borrowing.

Borrowing domestically to finance arrears was equally important to give a lease of life to the private sector, Mr Terkper explained, stressing that “the Government is not anti-growth; fiscal prudence is being done cautiously not to crowd out the private sector.”

PWC, on behalf of its clients, called for the treatment of Value Added Tax (VAT) on imported services as input and output VAT to occasion a set-off at the time of filing returns, rather than making it a refundable upfront payment. That arrangement, they argued, was necessary to forestall cash flow problems.

Companies that came under the Large Taxpayer Unit (LTU) should also be exempted from withholding tax and that the issuance of tax clearing certificates (TCC) should be automated and extended to all tax district offices.

The businesses, predominantly of clients of PWC, also demanded the widening of the tax net, with emphasis on roping in evasive companies, as well as the injection of certainty in the country’s tax regime.

Tax systems, policies and laws change quite rapidly in the country with all sorts of adhoc systems which the private sector argued, affected their planning.

PWC and its partners also called for the ratification of double taxation agreement between Ghana and other countries as well as the speeding up of the automation of the tax system, particularly for the issuance of TCCs.

Story : Samuel Doe Ablordeppey
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