The Chartered Institute of Taxation Ghana (CITG) has backed calls for the suspension of the new Income Tax Act, 2015 (Act 896), describing portions of the law as a mockery of the international guidelines on taxation.
Beyond being counter-productive, the institute said the government's desire to mobilise more revenue through taxes caused it to overlook pertinent regulations on taxation during the formulation of the Act; hence, the need to suspend its implementation until such flaws were addressed.
It mentioned the introduction of the one per cent windfall tax on companies enjoying tax holidays, the adjustments made to the capital gains and withholding taxes and the new 10 per cent withholding tax on the purchase of unprocessed minerals as some of the provisions that were counter-productive and contrary to the general regulations on taxes.
Its national president, Mr Mike Kofi Afflu, said at a stakeholder forum in Accra that slapping companies on tax holidays with a windfall tax was unacceptable and an abnormality that should not be entertained in the country.
"It is true that we need revenue and so we should tax but let us not mock the tax rules. No serious country anywhere taxes its citizens or investors on tax holidays. A tax holiday means tax holiday and any investor on that holiday should not be required to pay any tax within that holiday period," he said at the forum organised by the Ghana Revenue Authority (GRA) to throw more light on the new tax act.
Luring investors
The Act 896 was passed in September 2015 to replace an old one that was in existence for about 15 years.
It made changes to the various tax types while introducing new taxes on sectors that were initially outside the tax net.
While lauding the intentions behind the Act, Mr Afflu said the general outcry that greeted its introduction showed that the Act was better off being withdrawn for fine-tuning to be re-introduced at a later date.
"For us at the institute, we think that looking at the impact that it is going to have on businesses and people, it is better to abolish it," he said, citing the negative impact on growth and stability.
With capital gains tax now at 15 per cent, up by five percentage points, the CITG President said investors were most likely to shy from the country due to the high cost of taxes they would bear when their investments begin to mature.
Given that this adds to the 15 per cent withholding tax, Mr Afflu said investors could be expected to dump the country for neighboring countries like Côte d'Ivoire, where the regime is comparatively flexible.
"The capital gains tax will not favour investments. We recommend that the old regime be maintained so that capital allowance can be carried forward else we should expect investors to move to Côte d'Ivoire," he added.
Finance Ministry disagrees
A Tax Policy Advisor at the Ministry of Finance, Dr Edward Larbi-Siaw, however, disagreed with the position of the institute.
He said that even though companies on tax holidays were generally not taxed, Dr Larbi-Siaw said a new strategy in policy was that such companies should be asked to share a little of their profits with the state to help support development.
"If he says it is not done anywhere, does that mean it cannot be done here," he asked in reference to Mr Afflu's comments on taxing companies on tax holidays.
"In fact, some tax experts are saying that there should not even be tax holidays. Besides, recent studies show taxation is at the bottom of the league of things investors consider before coming into a country. So, if you say that investors on tax holidays should not be taxed, then maybe that is from the old school," he said.
On the outcry that greeted the introduction of the new act, the Dr Larbi-Siaw said it showed that the policy was biting and the government would work to implement it.
He further called on businesses and individuals to comply to help mobilise revenues for the government to support the economy.
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