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Jan 5, 2016

Government explains implementation of income tax act


Accra, Jan. 4, GNA – Government has said the essence of the withholding tax regime on services was to improve tax compliance.

It said it was not a final tax but a payment on account and therefore the increase in withholding tax on services to 15 per cent was to encourage taxpayers to file their returns.

A statement issued in Accra on Monday by Mr Seth Terkper, the Minister of Finance said after filing the returns they would be entitled to a credit for the amount withheld.

It said following the passage of the Income Tax Act, 2015   (Act 896) in September, 2015, Government has taken note of the concerns of taxpayers on some provisions of the Act especially those relating to the withholding tax on the provision of services and the payment of tax on interests paid to individuals.

It said the Act allows the Commissioner-General to grant    exemptions from withholding tax to compliant taxpayers.

“The Ministry of Finance has therefore directed the Ghana Revenue Authority to implement these provisions. Proposals have also been submitted to Parliament to review the rate,” the statement said.

It said on the issue of the imposition of a 1 per cent tax on interest earned by individuals, Government has already submitted proposals to Parliament to reverse the position.

It said it was important to draw the attention of the public to the objectives and significant benefits of the Act which were to revise and consolidate the laws relating to income tax after fifteen years of operation of the Internal Revenue Act, 2000 (Act 592).

This review included consolidating the general fiscal regime,   Minerals and Mining Income Tax, Petroleum Operations Tax, and the taxation of entities such as Public, Mutual, and Non-Profit Causes.

It simplified the provisions of the legislation and makes   it more user friendly, enhances efficiency and facilitates compliance.

The review retained provisions that were peculiar to income tax administration worldwide.

It further broadens the tax base and removes the narrow and distorted tax base of the Internal Revenue Act, 2000 (Act 592); rationalizes, streamlines and restrict tax concessions and tackles erosion of the tax base.

The law provided additional benefits for taxpayers as all   taxpayers are now allowed to determine and pay taxes based on their own estimates; carry forward losses and take account of losses on the disposal of capital assets.

The withholding tax threshold has also been revised from GH₵500 to GH₵2, 000 to take account of inflation and exclude small value transactions from the withholding tax mechanism.

The threshold for taxation of car benefits has also been improved from GH₵150 and GHs300 to GH₵250 and GH₵600 respectively to take account of inflation.

The debt-to-equity ratio has also been revised from 2:1 to 3:1 to allow for additional debt financing and at the same time allow the interest on the debt as an allowable deduction. – GNA