House rent is an income in Ghana that has evaded direct tax for quite a long time. Owners give out houses or portions of houses to individuals and corporate entities and make huge sums of Ghana cedis, at times dollars, without paying anything to government as tax on all rents received.
There has been a widespread and lengthy talk about government’s effort to widen the tax net in order to increase revenue to sustain the national economy. But one income that has been concealed from government’s ‘eagle eyes’ is rent.
Building houses and giving them out for rent has become a booming business in Ghana today. Since all businesses are to pay a portion of their income to government in the form of tax, then it is appropriate and necessary for house owners and landlords to pay a percentage of all rents they collect from their tenants to government.
Considering the number of rented apartments in Ghana, if all rents are charged even 5% by government, it will fill the State’s coffers with an appreciable value of money at the end of every month. Such moneys can be channeled into developmental projects in the country without necessarily having to borrow from external sources.
It will not be easily and readily acceptable by all Ghanaians if this rent tax is introduced, but if the public is well educated and sensitised on the benefits that come with it, the populace will embrace it in due time. Also, this should be treated wholly as a national policy devoid of any partisan politics and political interruptions.
Ghanaians should be sensitised on the benefits of this rent tax to the nation as a whole – some of which include the fact that it will ease the burden of tax increment on the already existing taxes such as VAT, Income Tax, Import Duties etc., all in a bid to increase national revenue to sustain the national budget.
To ensure successful introduction and implementation of the Rent Tax Policy, the following suggested measures should be put in place:
- A Rent Tax Office should be established in all District Assemblies.
- At the Rent Tax Office, all houses given out for rent must be duly registered. These houses will be given embossments to be placed in front of the houses as an indication of registration.
- Landlords or house owners who fail to register their houses must be sanctioned (made to pay a fine) or barred from giving out houses for rent or both.
- All registered houses must be categorised based on the facilities available in the house, the locality in which the house is situated, the nature and quality of the house, commercial activities in the locality etc.; this categorisation will serve as a yardstick for the pricing of rents. This will help resolve the ever-increasing riots and rifts between landlords and tenants resulting from the frequency of rent increments.
- The Rent Tax Office should be operating with a database software. Landlords of newly completed or already existing houses with vacant rooms for rent should furnish the Rent Tax Office with such data. In so doing, tenants or prospective tenants looking for accommodation will just walk straight into the Rent Tax Office for information on vacant accommodation in localities of their choice. Then landlords of such accommodations are invited to the Rent Tax Office for a rent agreement to be signed between the landlord and the tenant duly witnessed by personnel of the Rent Tax Office.
Rent advance is then paid directly to the cashier at the Rent Tax Office, then he in turn deducts the rent tax and hands over the excess to the landlord. Thus, it would be difficult if not impossible for landlords to evade the Rent Tax.
- The Rent Tax Office will serve as an intermediary between the landlords and tenants. This means the Rent Tax Office will be dealing directly with tenants on behalf of landlords. This is to say, when rents are due, tenants pay their rents at the Rent Tax Office or into a designated bank account and submit their receipts to the Rent Tax Office. Then government takes away its portion of the amount as tax before handing over the remainder to landlords.
- Rents of all houses in the same category should be priced equally. Pricing of rents should be done by a close negotiation between the landlords and government official at the Rent Tax Office. This will prevent landlords from trying to take undue advantage of the Rent Tax and pricing rents at abnormally higher rates with the intention of shifting the burden of the tax onto tenants.
- Houses will be upgraded from a lower category to a higher one as landlords renovate their houses to upgrade their nature and quality. As the houses are upgraded, their rents are increased.
- The Rent Tax Office coming into force will replace the existing Rent Control Office.
Government needs money to support the economy. Increases in taxes on fuel, import commodities, VAT among others are all efforts by government to ensure sustenance of the economy. All these efforts are appreciated but there is still more to be done. Government still has a lot of efforts to make to generate more revenue, but it would be unfair on the part of government to keep increasing the existing taxes when new and important taxes that can fetch it huge sums of money can be created.
This should be seen clearly as a national policy and not be handled with ‘political gloves’. Let us present this before parliament and have our parliamentarians deliberate on it. Better still, we can have a referendum on this issue so that the entire populace can have a say in it to arrive at a decision.
I believe if a consensus is arrived at to pass a bill on it, this will go a long way to save our nation from some of the economic challenges we find ourselves in. It will also go a long way to solve most of the housing challenges we face presently.
Patrick Kwabena Adjei