Government should implement new tax rates passed by Parliament

The Ghana Tax Justice Coalition has appealed to President John Evans Atta-Mills and Finance Minister, Dr Kwabena Dufuor to demonstrate their “political will and commitment” to implement proposals submitted to Parliament for approval.

“We wish to encourage all Ghanaians, especially workers’ leaders to study the budgets critically and always ensure that what has been approved by Parliament is implemented.

“In particular, tax concessions and reviewed tax rates that are aimed at alleviating the suffering of the ordinary worker should not be allowed to remain unimplemented.

Politicians should not continue to deceive the electorate by making promises that they do not intend to fulfil. The Budget is an important policy tool that should not be toyed with. If government does not intend to implement a policy, then it should not include it in the budget proposals.”

The appeal was made in a statement issued by the Ghana Integrity Initiative (GII) on behalf of the Coalition by Mr Vitus A. Azeem, Executive Director of GII, in Accra.

The Ghana Tax Justice Coalition is a group of civil society organizations and individuals that advocate for a transparent and fairer tax system in the country. It is part of the Global Tax Justice Network and Tax Justice Network - Africa.

Some of the pioneers of the Coalition are Ghana Integrity Initiative (GII), the Integrated Social Development Centre (ISODEC) and Christian Aid – Ghana.

The Coalition, called on both the Ministry of Finance and Economic Planning and Parliament to avoid doing the same thing with the new tax rates that were contained in the 2012 Annual Budget that had been approved by Parliament.

“This time, the LI to operationalise the new tax rates should be laid before and approved by Parliament without any delay to take retroactive effect from January 1, 2012. The essence of the reviews of tax concessions, tax rates and personal tax reliefs is to cushion the tax payer from undue hardship due to inflation and other economic difficulties. It is, therefore, imperative that when the government announces new tax policies, all the key players should act promptly to ensure that the tax payer benefits from the policies.”

It asked the Ministry and Parliament to explain to Ghanaians, “The main reason for the delay in laying the LI before Parliament for its approval to take effect from January 1, 2011; what prevented Parliament from approving the LI to take retroactive effect from January 1, 2011? The main reason for the additional delay from July to November, 2011, for the LI to take effect after its approval in July.

“In addition, whether the Ministry and Parliament considered the negative effect of their inaction on the salaried tax payer as compared to the self-employed who waits to file returns at the end of the year; did the amount required to pay the Single Spine Salary have anything to do with this or was it for political expediency? And to assure Ghanaians that there are no other important aspects of the Budget that have never implemented.”

The Coalition recalled that Third World Network (TWN) issued a statement on a similar inaction recently.

“It drew the attention of Ghanaians to the fact that Ghana's 2012 “Annual Budget Statement and Economic Policy” proposed an increase in corporate tax for mining companies from 25% to 35%. However, this tax is yet to be implemented although the Budget was passed into law in December 2011, deliberately depriving the country of the additional tax revenues that the country would have obtained.”

“At the end of 2011, Parliament approved a Legislative Instrument “Internal Revenue Act (Schedule) (Amendment) Regulations, 2011” (L.I. 1996). The LI was approved on July 11, 2011 but its date of notification was July 22, 2011.

“However, its date of entry into force was November 25, 2011. The LI, among others, provides for new income tax rates applicable to resident individuals for the year 2011.”

It recalled that these new tax rates were contained in the proposed 2011 Annual Budget that was presented to Parliament and approved in December, 2010 to take effect from January 2011.

This was meant to alleviate the tax burden on the citizens.

Once the Annual Budget was approved by Parliament the new tax rates should have been implemented with the other provisions of the Budget for 2011. What was expected was for the Minister for Finance and Economic Planning (MOFEP) to lay the appropriate LI before Parliament for its approval and after 21 days, the LI would have become law unless Parliament had a problem with it.

Apparently, either the Sector Minister failed to do this or Parliament failed to act promptly on the proposed LI. However, the Sector Minister finally got the required approval on July 22, 2011 and the tax rates should have become applicable immediately if not with retroactive effect from January 1, 2011. This did not happen.

Moreover, a close examination of both the old and the new tax rates show clearly that they do not favour the poor and low paid employees in the country. The lower bands are very insignificant, bringing virtually no benefit to those in the low income brackets. This shows that the apparent progressivity of our income tax system is largely restricted.

These bands need to be made wider and come with the re-introduction of the three tax bands, that is, 15 per cent, 30 per cent and 35 per cent bands, that were removed some time ago.

Parliament also failed the Ghanaian tax payers, particularly the salaried workers whose taxes are deducted at source on a monthly basis. The LI came into force on November 25, 2011 when the year was just about to end for reasons best known to the Members of Parliament who are supposed to speak and act on behalf of their constituents.

Ghanaians lost the benefits of the new tax rates without any explanation from members of the two arms of government who are elected by Ghanaians.