The Tax Debate On Whether Or Not Religious Institutions Should Be Subjected To Tax Imposition: My Take
I have followed the tax debate for sometime now in relation to a public declaration by the GRA headed by the commissioner general to extend the tax net to religious institutions.It is important to understand the need for man to honor the obligation of contributing a share of his/her income in financing public expenditure for the betterment of the society. The origination of TAX could be traced in the book of Genesis 2:15. Over the years we have had various LAWS that governed the imposition of tax and collection of INCOME TAX and notable among them are,
The income tax ordinance 1943(ordinance No.27),with its amendments like
Ordinance of 1952 and 1953
Internal Revenue Act,2000(Act 592) and the Internal Revenue Act,2002(AMENEMENT)Act,622
The current we have which came to amend the parent Act( INTERNAL REVENUE ACT,2000(ACT,592) is the Income Tax Act,2015(Act 896).The applicable Act has been amended by Income Tax Act,2016(Act,Act,907) where we have some deletion and insertion.Before I proceed with my subtantative argument,let me lay emphasis on the position of the Act,2000(Act,592) on the exemption of tax of activities of religious bodies of "public character" which the framers of the applicable Act saw the need in changing the old Act. The old Act classified religious bodies of public character as exempt tax and for that matter,income of those religious bodies with public character was not subjected to tax imposition with reference to section 10(1)(d) of Act,2000(Act 592).
The framers of the old law saw the WISDOM in granting tax exemption to those institutions of" public character" due to the fact that,they are not profit making organisations and do not engage in any economic activity for the purpose of gains. In the new Act which is the applicable Act, "Religious bodies of public" character have been put under *CHARITABLE ORGANISATIONS* with specific reference to section 97(1) of Act,2015(Act,896). From the onset,we have had the biggest challenge as to why the application Act failed to give a specified definition to income. It only gave indication of what are seen as income to be taxed.If the Act had given us a definition of what Income is all about,we wouldnt have gotten to where we are today where there is a controversy as to whether or not the tax net can be extended to Religious bodies classified under charitable organisation( see section 97(1)(2)(ii) of Act,2015(Act 896).What the applicable Act should have done should have been the incorporation of International Accounting standard(IAS 18)( and 12) into the Act to give a fair and sound definition of REVENUE and Income of person(s) for the tax purpose but here comes the case the Act didnt do that.
Our tax law gives recognition to accounting methods and policies to be adopted for the computation of tax of individuals and Person(s) as stated in both section 19(1)(2)(3) as well as section 20. The framers of the law should have paid attention to the financial Reporting standards and International standard of accounting in providing a simple definition of income so that,in the case of an attempt to widen the tax net to "smuggle institutions/ bodies inside the law to widen the tax net,it wont create any mischief arising out of confusion. The international accounting standards (IAS 18) defines income as increase in economic benefits during accounting period in the form of inflows or enhancement of assets or from equity participants. The IAS 18 splits income into two major components namely, REVENUE and gains.
Revenue is therefore the inflow of cash,cash equivalents,receivables or other consideration or decreases on liabilities in the course of ordinary activities of an enterprise. The statement recognized revenue as arising from the following, (a) the sale of goods held for sale(b)rendering of services and (d) interest,royalties and dividened received on sources made available for other use.
The Act only defines chargeable income as well as assessable income For tax purpose which therefore restricts or limits the Act to only three taxable components.Namely, (a) income from employment(b) income from investment and (a) income from busines. What it means is that, tax can only be imposed to the listed components of chargeable income.( See section 4(1)(2)(a) (i)(ii)(iii)(iv)(v)(vi)(vii)(viii)(ix),5(1)(2)(a)(i)(ii)(iii)(iv)(v)(vi)(vii)(viii) and 6(1)(2)(a)(i)(ii)(iii)(iv)(v)(vi)(vii)(viii) of Act,2015(Act,896). A critical look at the listed provisions should be able to inform you and I that,we cant put "Religious bodies under or inside any of the sub-components in any of the section 4,5 and 6 of the applicable Act so the argument that, religious institutions would be dragged into the tax domain cannot happen.
Section 97(1)(2) where the Act defined charitable organisations is not effective because, the finance minister has not been able to activate section 97(6) of Act,2015(Act,896) which would have put to rest the ensuing issues where other school of thought are of the view that,religious bodies should be taxed with other opposing views. Again one mischief the Act has created is the fact that, the Act itself didnt specify what a religious body of "public nature" is all about as well as the said bodies under "public nature"
To conclude my argument, I want to make it known and clear that, an attempt to include religious bodies in the tax net cant be possible.
Citizen Vigilance for Justice
Disclaimer: "The views/contents expressed in this article are the sole responsibility of Dawda Eric and do not neccessarily reflect those of Modern Ghana.