Although government appears silent on new taxes in its 2016 budget, Ghanaians should expect to pay more taxes in the coming year, PricewaterhouseCoopers has observed.
This is part of the revised Income Tax Act which takes effect from next year.
Even though the Finance Minister referred to the revised tax laws in the Act during his presentation in Parliament last Friday in Parliament, he fell short of such details.
Revealing some more specifics to JOY BUSINESS, Senior Manager of Tax Services at PricewaterhouseCoopers, Abeku Gyan-Quansah explained that regardless of where incomes are generated once you become a resident, it will be taxed.
“Now for resident persons, if you earn income your worldwide income will be taxed. Let’s say I’m a resident in Ghana, staying in the USA and I came home on holidays and sent some money into my bank account.
“Under the old law if I’m resident in Ghana, the only amount that will be taxed is the one I sent home”.
“Now we are moving to a regime whereby whether or not you send the money home, as long as you are a Ghanaian resident your money will be subjected to tax in Ghana”.
“This was not mentioned in the budget”.
He said government is now collaborating with departments of other countries to facilitate the taxing of incomes of persons who keep their earnings in foreign countries and bring a part to Ghana to be taxed while resident.
For businesses, he cites mainly an increase in Capital Gains Tax and Withholding Taxes. According to him, the Capital Gains tax has gone up from 15% to 25%.
The tax is gains that you make when you dispose off any asset that gives rise to capital gain
“For instance, you sell a building or a piece of land you’ll be subjected to 15% tax but now that has been removed and you will be subject to tax at the general rate.
“In Ghana the general rate is 25% which simply means that the Capital Gains Tax has increased from 15% to 25%” he said.
He also explained that Withholding Tax on services has increased from 5% to 15%.
“For example, previously if PWC wanted JOY FM to do something for it, it is expected that when paying, PWC will withhold 5% of that to be sent to government and we will give evidence of that but now the amount has been revised to 15%”.
The Tax expert also pointed out some tax reliefs for businesses in 2016.
They could also enjoy some respite as per the revised Income Tax Act.
Abeku Gyan-Quansah explained that from 2016, businesses who suffered losses in the previous year may be compensated in their tax returns.
So, for instance Joy FM makes a loss of GHC 20 this year, under the new law, they can carry forward that loss so that next year if they make an income of GHC100, they pay taxes on GHC100 minus GHC20 and apply the right amount of taxes”
Mr. Quansah added that the revision of the country’s tax laws which has resulted in these developments is only in line with international best practice.
“Worldwide, a lot of regimes allow businesses to carry forward tax losses, the reason is that government is a silent shareholder in businesses because the taxes paid are used to construct roads, hospitals, pay doctors etc”.
“So if I make losses it is also expected that the state bears my losses by allowing me to carry forward those losses” he added.
But in response, government has denied introducing new taxes from next year.
The Finance Minister, Seth Terkper admitted that although these changes were not spelt out in the 2016 budget as expected, they are already in effect after requisite consultations.
He was speaking at the Annual General Meeting of the Association of Ghana Industries yesterday.
“The new Income Tax Act actually came into effect with the assent. So it came into effect with the effective date which will require some pro-rating of income and other things by businesses”.
“Its already in effect so there’s nothing deliberate about not mentioning some of those in the budget. With hindsight, maybe we should have mentioned it because they are already in effect and they were debated” he noted.
The Minister further explained the changes in the revised laws are not necessarily tax increases.
“For example the Withholding tax, what we are doing is equalizing the with-holding between good and services. Another example which came with the free zone says a free zone is export oriented and so if you sell domestically, why should you pay a lower income tax rate than the industry which is established to serve domestically?
“The incentive is for export so the portion you sell domestically is competing with domestic industries and therefore taxes should be fair between domestic industries. he added.