Income Tax regime to be overhauled

Government is seeking to broaden the tax base and reorganise the various income tax law provisions to simplify them and make them more user-friendly.

This is the rationale behind the new Income Tax Bill, 2015 when it goes for parliamentary approval in the coming weeks.

It is expected to guide the different methods and time for payment including tax payable by withholding, tax payable by installment, and tax payable by assessment, have also been retained and improved to enhance efficiency and facilitate compliance.

According to chairman of the parliamentary select committee on Finance, James Avedzi, in order to ensure harmonisation of all tax laws, the common administrative processes have been pooled together into a single legislation, the proposed Revenue Administration Bill.

“There is therefore need to recognise the residual provisions in the respective revenue Acts.”The Commissioner-General (C-G) of the Ghana Revenue Authority, George Blankson who was part of the deliberations, indicated that the 14 years of implementing the Internal Revenue Authority Act, 2000 (Act 592) revealed the narrowness and distortedness of the country’s tax base.

He also argued that in an era when many countries have broadened their tax bases and lowered tax rates, the Ghanaian tax base seems to have been narrowed although tax rates have gone down.

It was indicated that broadening the tax base was one of the rationales for the reforms carried out between 1999 and 2000, which aimed at restricting and phasing-out tax concessions.

Mr. Blankson added that it was anticipated then that, in time, more concessions would be removed; however, the opposite happened and the current law is still littered with ill-targetted erosions of the tax base.

Among some of the changes the new Income Tax Bill seeks to enforce is Clause 1: which specifies “persons required by law to pay income tax for each year of assessment and the mode of calculation in respect of the income tax payable; while Clause2 provides for the chargeable income of a person for a year of assessment.

Some also include the determination of what constitutes the income of an individual from an employment, business or investment for a year of assessment. Tax rates, modified taxation, capital allowances, quantification of benefits, personal reliefs, temporary concession and tax administration are all provided for.

Mr. Avedzi further explained that the bill provides for a number of personal reliefs for individual taxpayers. These include reliefs for spouses and dependent children, individuals living with disabilities, old age, and children and other dependent children’s education.

“The committee learnt that though some of these reliefs are provided for in the current Income Tax Act, most taxpayers are not benefitting because they may not be aware or do not file their tax returns annually. We therefore urge the Ghana Revenue Authority to embark on taxpayers’ education about reliefs, and the need to file returns annually.”