Government has revised a number of its tax laws with the aim of making tax compliance easier and more attractive , while achieving its revenue generation goals for national development.
Three pieces of legislations have therefore been passed to amend their principal laws.
Act 1071 has been introduced as an amendment on the income tax Act 896. Act 1072 has also been introduced to amend the VAT Act 870. Similarly, The Waiver of Penalties and Interest Act 1065 has been amended to Act 1073.
The Ghana Revenue Authority says government has made these amendments to relieve the citizenry, as well as make tax payment more convenient, enabling individuals in the informal sector to comply voluntarily.
According to a Principal Revenue Officer at GRA, Lawrence Hotsonyame, one of the key features of the Income Tax Act 1071, is that “individuals that fall within the lower income bracket are exempted from paying tax or they pay marginal taxes.”
Educating the public via the Eye on Port tv program, the GRA official revealed that the threshold for tax exemption has been fixed at an annual income of GHC 4,380 from the previous GHC 3,828.
He said, “this means that any resident individual who earns below GHC 4,380 per the new arrangement, you are not liable to pay income tax,” he said.
“The next stage which is GHC 1,320 goes for 5%, GHC 1,560 goes for 10%, etc. It is a graduated rate. These rates are progressive in the sense that, the higher you fall within the higher tax bracket, the higher you pay. This flexibility in the rates helps those in the low income groups to make tax savings,” he continued.
Mr. Hotsonyame also disclosed that, a presumptive tax system, has been introduced for sole proprietors.
He explained that, “the benefit here is what has been introduced as turnover tax. All retailers whose annual turnover exceeds 20,000 but does not exceed 500,000 qualify under the presumptive tax system. Basically what we do is that we pick your turnover and calculate the tax at 3% instead of the graduated rate which would have had some of your income taxed at 17.5%, 25% or even 30%.”
“Again, a lot of people do micro businesses and petty trading in this country and their turnover falls below 20,000. Here, the law prescribes marginal rates ranging between 30 cedis to 100 cedis per quarter. If you pay 30 cedis per quarter, the whole year you pay 120 cedis,” he added.
Mr. Hotsonyame stated that these initiative have been carefully crafted out to support taxpayers in the informal sector who struggle with record keeping and maintaining internal controls.
The Principal Revenue Officer at GRA indicated however that professionals conducting business as well individuals running different businesses, or businesses with high profit to turnover ratio do not qualify under this dispensation.
Such individuals, he said are treated under the modified cash system.
“Here, we will determine your total income for the year, deduct your expenses, and arrive at the chargeable income and tax that chargeable income using the graduated rate.”
Taking his turn on the subject, an Assistant Commissioner at GRA, Francis Appiah-Amoh, also revealed that the Act 1071 has also made provision to reduce withholding tax on unprocessed gold and rough minerals in order to cushion small scale miners. He said the rate has been reduced from 3% to 1.5%.
Touching on Act 1072 amendment on VAT, he said the VAT flat rate scheme has been introduced for retailers who earn an annual turnover between GHC 200,000 to GHC 500,000 to charge VAT at 3%. On the other hand, individuals who earn above GHC 500,000 would have to charge VAT at the standard rates.
He said, the standard VAT rate is the net difference calculated from the VAT paid on the purchases against VAT charged to consumers.
The officials from the Ghana Revenue Authority, said the revision of the VAT flat rate scheme is as a result of the realization of the impact it had on the price of goods.
They revealed that the amendment made for Act 1073 is also intended to give opportunity for tax defaulters to apply for a waiver on the penalties and interests for the period ending December 2020, with satisfactory arrangement for principal taxes to be paid.
“Taxpayers who have tax debts till Dec 31, 2020 can apply to the Commissioner General to waive off the associated interests and penalties once you make the necessary arrangement to pay the principal debt. The main law, ACT 1065 was passed last year. The expiration for the application was 30th September 2021, but it has been extended to 30th June 2022 for all those who couldn’t apply,” Mr. Appiah-Amoh explained.
The GRA officials emphasized that government is mindful of the hardships Ghanaians have faced during the pandemic that is why it keeps making these various tax adjustments to enable citizens to conveniently pay their taxes.
The Authority is therefore urging all citizenry to fulfil their tax obligations in order to help government in its economic agenda.
It says failure to comply will force the Authority to employ the various enforcement tools at its disposal, to ensure taxes are paid.