Income Taxpayers Are Only 1.4 Million

Statistics made available by the Ministry of Finance indicates that, the total number of Ghanaians workers who pay income tax are summed at 1, 421,676. Of this figure, 641, 633 are in the public sector while 780, 043 are in the private sector.

To improve the fairness, the existing minimum income which is exempted from income tax has been increased from GHc1, 584 to GHc2, 592 as proposed in the 2016 budget of the government.

In line with government’s social democratic principles, the personal income tax has been used as a major tool for equitable distribution of income and the protection of low income earners.

Anthony Dzadzra, Head of Tax Policy Unit of MoF told a section of stakeholders and representatives of major taxpayers drawn from both public and private sectors at a post budget forum organized and sponsored by GIZ, he supported the review in the income tax threshold and explained that, for three years now the threshold has not been reviewed.

In the same budget, to enhance resource mobilization to close the funding gap, government introduced a number of tax policy and administration initiatives. The overarching goal is to create additional fiscal space for sustainable budget expenditures in ways that are more efficient, fairer and better promote good governance.

Also, as government is continuously reviewing the tax exemption regime in the country in order to create the appropriate fiscal space for development. Various studies have been conducted to estimate the quantum of Ghana’s tax expenditure for the 8-year period 2008-2015.

A report by the Ministry of Finance/Ghana Revenue Authority team estimates the average tax expenditure to Gross Domestic Product ratio to be 2.01 percent.

The tax expenditure to GDP ratio for 2013-2015 are 1.68 percent, 1.82 percent and 1.98 percent respectively.

The various studies also observed that MDAs and MMDAs include tax exemptions provisions in contracts and dispensations to businesses and NGOs without authorization and do not effectively verify or audit the exemptions granted.

Based on the recommendations of the various studies, government has agreed to progressively use tax credit schemes instead of outright exemptions and explore the use of Double Taxation Agreement (DTA) provisions to the country’s advantage instead of granting outright exemptions.

Also, GRA and MoF are to reinforce the measures taken so far to reduce the negative impact on exemptions on the tax base which also lead to uneven playing fields for businesses and tax payers in general.

These measures include: drastic limit on the use of ‘permits’ to clear goods from our ports; improved coordination between MoF and GIPC leading to possible amendments of the GIPC Act; abolition of VAT relief purchase order and the establishment of the General Refund Account; Customs and Domestic tax office to revalidate all existing exemptions on file leading to a new list and new implementation guidelines from January 2016.

Moreover, MDA are now to negotiate and conclude contracts that grant exemptions without the necessary approval from MoF. Exemptions granted without approval from the Ministry of Finance will not be recognized and processed to Parliament for ratification.

Additionally, Government plans to put in place strict measures to curb abuses in customs exemptions. Furthermore, government will consider replacing upfront exemptions with a tax credit note and treasury credit note after a comprehensive study in 2016.

According the Ghana Revenue Authority Commissioner-General, George Blankson, improvements in the tax revenue effort have been constrained by the fall in commodity prices and power supply challenges that led to a slowdown in the growth of business activity in the economy.

Additionally, he noted that, Ghana has high tax exemptions regime, undoubtedly collection leakages, low compliance, inadequate taxpayer information and weak linkages among public agencies and these have affected tax revenue collections over the years.